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AARP, NASAA, and Consumers Tag Team to Interview YOU!

Remember when AARP used to send volunteer monitors into free-meal seminars to identify advisor wrongdoing? That move may not have endeared them to financial scammers. However, advisors with nothing to hide didn’t mind having an AARP “Secret Shopper” in their session. Now the 37 million-member affinity group has rolled out another initiative to protect senior investors: AARP Interview an Advisor TM.

The new program is designed to simplify and take the mystery and guesswork out of the process of interviewing and hiring a financial professional. It provides consumers with a short list of suggested questions about advisor’s qualifications, compensation methods, and standard of care. It also includes an introductory script for consumers to kick off their candidate interviews.

Free and available to AARP members and non-members, the online tool is optimized for mobile use. It also can run on any smartphone, tablet, or computer.

“Many people can benefit from working with a financial professional,” said Joseph P. Borg, NASAA president and director of the Alabama Securities Commission. “But they just don’t know where to start when it comes to selecting one. Interview an Advisor provides guidance on the types of questions to ask an advisor and helps frame the discussion to empower investors in the selection process.”

A key goal of the new tool is to spark a frank discussion about an advisor’s fiduciary or non-fiduciary status. “While registered investment advisors serve as fiduciaries who are required to provide advice that is in their clients’ best interest, many other financial advisors operate under different requirements that obligate them only to make recommendations that are ‘suitable,’” said Jean Setzfand, senior vice president, programs, AARP. “AARP’s new interactive guide will help investors avoid confusion about a financial professional’s standards and qualifications.”

Not only does the tool give consumers a questioning track, it also provides the capability to save advisor responses online for AARP and NASAA research purposes. However, to advisors’ relief, it lacks the ability to enter and save a financial professional’s name and contact information.

Advisors will also be happy to hear that the AARP guide includes only 13 questions, most of which are fairly straightforward.

Still, to make sure you’re not caught short, consider reviewing the AARP question list below and think through your answers in advance.

How many years have you been providing financial planning or investment advisory services? Less than 1 year? 1-5 years? 5 or more years?

What licenses or professional designations do you hold? 

Have you ever been disciplined by a regulator?

What financial services do you provide? (Check all that apply):

  • Comprehensive Financial Planning
  • Tax Planning
  • Mutual Fund Selection
  • Business Planning
  • Tax Preparation
  • Brokerage Services
  • Estate Planning
  • Insurance
  • Investment and Asset Management
  • Retirement Planning
  • Education Funding

What types of investments do you offer to clients? (Check all that apply):

  • Stocks
  • Municipal Securities
  • Futures/Commodities
  • Certificates of Deposit
  • US Government Securities
  • Mutual Funds
  • Limited Partnerships
  • Coins or Other Collectibles
  • Bonds
  • Options
  • Insurance Products
  • Direct Participation Programs
  • Other

How often will you meet with me to review my investments?

Are you limited to offering the investment products offered by the brokerage firm with which you are affiliated?

Are the returns on my investment guaranteed?

How are you compensated? (Check all that apply):

  • Percentage of assets under management
  • Commissions and loads for financial products purchased and sold
  • Salary

Will you break out all of your fees and commissions?

Do you charge for services like duplicate copies of investment statements, postage and handling, or transfer on death fees?

Does your relationship with me falls under a “best interests” or a “suitability” standard?

 

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Facial Expression Software: Fact-Finding Boon or Financial Advisor Threat?

Technology has reshaped almost every aspect of insurance and financial sales. From the advent of the personal computer and spreadsheet software to the rise of the Web and mobile technology, it has become easier and more efficient to run a financial-services business today than at any time in the past.

However, sometimes the development of new technology raises more questions than it answers. That’s the case with facial expression software, which financial firms are using to uncover people’s emotions about money. Does this new application make traditional fact-finding more revealing and productive? Or does it undermine the financial advisor/client relationship . . . perhaps jeopardizing advisors’ standing in the industry of tomorrow?

One cause for concern: facial recognition software is entering a finance domain that until now has been old school—needs assessments. Until recently, this process has been human-directed. Flesh-and-blood advisors typically sit down in actual rooms and ask real customers questions to identify their financial needs and concerns. The best advisors are skilled at detecting client worries, both through their words and body language. They’re also adept at asking probing questions to clarify when words and and posture conflict.

In fact, the entire industry depends on thousands of financial advisors sitting across from prospects and clients, asking questions and encouraging clients to reveal their concerns. Problem is, the field of behavioral economics has poked holes in this methodology. In repeated studies, it has shown that clients have trouble making rational money decisions. More often, emotional and cognitive errors cloud their thoughts, leading them to make sub-optimal decisions. And the traditional fact-finding interview may not help advisors much, since emotional and cognitive errors may not be visible to the naked eye.

Making matters worse, sometimes clients hide their emotions when meeting with their advisors, either deliberately or unconsciously. This leads advisors to make off-the-mark recommendations that end up poorly serving their clients.

What if there were a way to better assess client emotions prior to making recommendations? If software could deliver that, would you use it? The financial professionals at independent advisory firm Cetera Financial Group are answering that question now. Their firm has introduced a new software program designed to analyze a client’s facial expressions during fact-finding meetings. The goal: to shine a light on people’s money emotions in order to build a deeper relationship between them and their advisors.

How does it work? Cetera’s Decipher application runs on any device that has a web camera. The financial advisor simply asks clients to watch a series of videos about financial scenarios. The software then maps minute changes in their facial expressions to reveal their underlying emotions toward money.

“Decipher is transformative for the advice industry,” says Robert Moore, CEO, Cetera Financial Group. “It takes the relationship with the advisor to the next level. A lot of information is conveyed non-verbally. This is a tool for relationship building that will help the advisor really know what is in the best interests of the client.” A side benefit is that it will make the entire investment recommendation process more transparent and compliant with the Department of Labor’s Fiduciary Rule.

Moore adds that the program will be available to any advisor and client who’d like to use it. Plus, it will not be used to create financial plans. Instead, its function will be to increase an advisor’s understanding of a client’s perceived problems. And he says the company may eventually integrate Decipher into its online risk profiling application, giving a future automated investment platform greater ability to retain client assets during times of market volatility.

Although Moore says Decipher will not replace advisors, it’s not hard to envision a scenario in which the software might decrease the advisor’s role during fact-finding. It’s possible Decipher may prove to be more efficient than a human advisor at detecting emotions. And how will advisors react to partnering with a computer? Will they assume the software is smarter than they and defer to it? Or will they stubbornly rely on their own instincts even when the computer says otherwise?

Another implication: how will clients react to interacting with a computer instead of a human advisor? Will they be comfortable with a machine “reading” their deepest emotions? Will they buy it when the computer says they’re feeling something they don’t believe they’re feeling? Or will they make an issue out of it, thereby derailing the sales process?

Finally, how will all concerned react to automating what used to be the living, beating heart of financial planning—the advisor/client needs discussion? Will people view the transference of part of this process to a computer as a good or bad thing? And ultimately, if the technology catches on at other firms, will it actually help clients and advisors build stronger relationships or will it undermine them? Only time will

To read on ethical business practices, visit the Ethics Center at the National Ethics Association, sponsor of EOforLess. 

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Top 5 Reasons to Buy E&O Insurance Online

Top 5 Reasons to Buy E&O Insurance Online

The insurance industry is a conservative, risk-averse business. That’s a good thing because as stewards of their clients’ money, the last thing it wants is to make decisions that put those resources in jeopardy. For this reason, the decision to begin selling insurance direct to consumers online was a deliberate, careful process that took many years to accomplish.

However, today, as insurers have become more comfortable selling insurance on the Internet, most product types are available online. In fact, insurers are now encouraging business owners of all types, including life and health insurance agents, P&C agents, and others to buy E&O insurance online. And frankly, it’s not a hard decision to make for the following five reasons.

First, buying E&O insurance online is typically a painless process. Thanks to leading-edge technology and the customer-facing innovation of firms such as EOforLess, financial professionals can now access websites that simplify and speed the process of buying E&O insurance online. For example, at EOforLess.com, financial advisors can easily establish an account, apply for coverage, and purchase protection in just a few minutes.

Second, at EOforLess, the “click-and-bind” process couldn’t be easier. Just select the right type of professional liability insurance for your needs based on our easy-to-navigate option menu. Then determine your desired coverage limits. With those key decisions made, all that’s left is to establish your account by keying in your personal information and selecting your payment method. Then simply complete a brief list of underwriting questions. If your answers qualify you for purchase, you can click and bind your coverage immediately thereafter.

Third, once your coverage is in effect, it becomes a simple matter to print out your certificate of insurance. Unlike with traditional agent-mediated shopping, buying E&O insurance online means you can get your insurance certificate instantly! If you need proof of coverage to pursue a sales opportunity through a new field marketing organization (FMO),  you’ll appreciate the value of getting it now instead of in a few days or weeks. When it comes to pursuing sales leads, time is of the essence. EOforLess.com responds by allowing you to print your certificate within minutes of getting approved.

Fourth, convenience and speed are meaningless if your E&O insurance is riddled with exclusions or your E&O insurer takes months to process your claim. Fortunately, EOforLess has partnered with some of the top E&O insurers in the market today. This means your protection will be there when you need it. For example, National Ethics Association, sponsor of EOforLess.com, selected Continental Casualty Company (CNA) as its carrier of choice for life and health agent E&O insurance. CNA is the 8th largest commercial property-casualty insurer in the United States and has extensive experience pricing E&O insurance risks in the financial-services industry. It is also strongly equipped to manage the E&O claims process through its team of highly experienced claims adjusters and network of affiliated attorneys.

Similarly, our E&O insurer for property & casualty agents is Everest National Insurance Company, a world leader in P&C reinsurance and insurance. Everest National offers innovative products, responsive service, and unsurpassed financial strength. Rated A+ XV (Superior) by A.M. Best and A+ by Standard & Poor’s, it has $21.4 billion in total assets (2015).

E&O Insurance with So Much More

Fifth, and finally, when you buy E&O insurance online at EOforLess.com, you’re not just buying E&O insurance. You’re also joining the National Ethics Association, a membership organization devoted to promoting ethical business practices in financial services. Your membership provides a variety of valued-added benefits, including:

  • Credibility icons for your website and marketing materials – Use the ethics.net Registered Member logo to show your commitment to ethics and transparency in every aspect of your business.
  • Search-friendly online profile – Point your customers to your ethics.net profile and extend your website’s online marketing & SEO.
  • Elevated trust – Our optional Certified Background Check shows consumers you have passed a rigorous criminal and civil background check, which instantly reduces friction in the sales process.
  • Access to our ethics.net content library – Our extensive online content helps you acquire the ethics and compliance knowledge you need to position your firm for long-term success.
  • Access to free insurance continuing-education courses – Through our relationship with Success CE, we help you sharpen your skills and keep your insurance license in force.

Act Now to Buy E&O Insurance Online

In summary, if you’re an insurance, financial, or real estate professional, why not buy E&O insurance online today? Start by learning more about EOforLess.com here. Then click through to get specific information about E&O insurance for life & health agents, for P&C agents, for registered investment advisors, or for real estate broker/owners.

And don’t forget . . . when you buy E&O insurance online at EOforLess.com, you also get access to a host of other benefits from the National Ethics Association. To learn more about those, go here.

So why wait any longer? If you need E&O insurance, consider this an open invitation to come, see, and buy E&O insurance online at EOforLess.com.

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When Client Mistrust Breeds E&O Insurance Disputes: Nine Ways to Stay Safe

The financial-services industry has a perennial consumer-trust problem. Year after year, studies show that consumers don’t trust financial institutions or financial advisors to do what’s right. A recent survey reveals that consumer mistrust of the financial-services industry slipped even further in 2016.

According to a recent study from the National Association of Retirement Plan Participants, consumer trust in financial institutions has fallen to an all-time low of 8%, down from 13% in 2015.  Meanwhile, trust in financial advisors is slightly better at 9 percent.

Obviously, when trust is low, all players in the financial-services industry suffer. Banks, mutual fund companies, insurers, and retirement plan providers, experience weaker sales and more churn when existing customers switch firms. Financial advisors experience greater friction in the sales process, reducing revenue and increasing marketing costs. And consumer may find it difficult to move forward with important financial decisions such as how to save for retirement. When trust ebbs, everyone loses, especially those trying to build sufficient retirement income.

“Saving for retirement is a deeply personal activity,” says Laurie Rowley, NARPP’s Co-Founder and President. “Saving impacts our well being today and in the future, it impacts our family safety, and our legacies,” Rowley says, “and the decision to save requires courage and trust—courage in oneself and trust that financial institutions have our best interests at heart.”

Consumer mistrust not only holds people back from achieving their retirement dreams, it also creates business liabilities for financial professionals. That’s because when consumers lack trust in their advisors, they’re more willing to ascribe negative outcomes to advisor greed or outright fraud rather than to just an honest mistake. This can lead them to file regulatory complaints or legal claims much faster than they otherwise would, forcing advisors to spend a lot of time and money to defend themselves. This includes filing claims with their E&O insurance carrier, which may be held against them when applying for future E&O insurance coverage.

So how can you prevent consumer mistrust from leading to complaints and lawsuits that get your E&O insurance company involved? The answer is to watch what you say and do both during the sales process and after a prospect becomes a client with your firm. Here are some basic pointers:

  1. During the sales process, be totally transparent about your role and standard of care.
  2. Always share plenty of information about your background, credentials, business practices, and life history so consumers know whom they’re dealing with, both professionally and personally.
  3. Commit yourself to a 100% fact-based selling style. This means avoiding the twisting of information or the use of fear to manipulate consumers into buying your offerings.
  4. Devote sufficient time to fact-finding so you can make appropriate recommendations grounded in client needs, resources, and risk profiles.
  5. Make clear you are serving their objectives, not yours, and don’t hesitate to walk away from a sale if you believe there is no valid need for it.
  6. Once a prospect becomes a client, always follow through on your promises and strive to exceed expectations in every sales and subsequent transaction.
  7. Own up to your mistakes and commit yourself to doing better in the future.
  8. Work hard to show clients you care about them by communicating frequently, providing small gifts, and welcoming them warmly into your office.
  9. Most importantly, work hard to prevent complaints and lawsuits by resolving misunderstandings before they become disputes, lawsuits, or E&O insurance claims. By doing your best to instill trust in your clients, you’ll buy yourself breathing room to remediate problems outside a court of law. Trust us . . . that’s a good thing!
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