Regarding large bureaucracies, Mother Theresa once said, “So many signatures for such a small heart.” The same could be said for the U.S. banks embroiled in the foreclosure scandal. Haven’t they learned anything from the economy’s meltdown?

Obviously, they haven’t learned that using so-called “robo-signers” to process foreclosure documents isn’t only wrong, but illegal. Do bank leaders actually believe mortgage clerks can sign 10,000 foreclosure files a month (or one per minute) and still give each file a proper review? Even if the clerks were doing their due diligence, one wonders whether they knew what to look for.

A foreclosure supervisor with Goldman Sachs admitted in a court deposition that she didn’t know the meaning of terms such as “promissory note,” “lien,” or “defendant.”

We can only conclude that banks are either woefully ignorant in this area or consciously criminal. But just because they’re doing this in banking doesn’t mean professionals in other financial sectors should do the same. In insurance, investments, and financial-advisory worlds, client and advisor signatures on sales forms and disclosure documents remain crucially important. Cutting corners or playing signature games can have serious consequences for all concerned.

Why are signatures so important? According to West’s Encyclopedia of American Law, “a signature is a mark or sign made by an individual on an instrument or document to signify knowledge, approval, acceptance, or obligation.” Its purpose: “to authenticate a writing, or provide notice of its source, and to bind the individual signing the writing by the provisions contained in the document.” Literally, every aspect of a businessperson’s success hinges on the validity of the signatures they ask their clients to make—and the ones they make themselves.

Sound straightforward, right? Yes, but the Devil is in the pen strokes. Despite the fact that most financial professionals get lots of training in this area, we still hear stories of them signing forms for clients and committing other serious paperwork mistakes. Those who do this run the risk of having their sales rejected, of clients filing complaints, of having their professional licenses pulled, and of getting entangled in errors-and-omissions insurance claims.

Don’t let it happen to you. Here are four key signature guidelines to keep you and your business safe:

  1. Never sign a document as a witness unless you actually saw the client sign the document.
  2. Never sign a form on behalf of another person, even if the person asks you to.
  3. Never ask or require a client to sign a blank or incomplete sales document or other form for you to fill in later.
  4. Never omit dates from forms and then later insert a pre- or post-date.

Remember, the road to perdition—and to nasty client lawsuits—is paved with bad signatures. Whatever you do, stay off that road! Your errors-and-omissions insurance loss history will thank you for it.

Visit our E&O Headqurters for more tips and insights on how to protect yourself.

It’s no secret that recent market cycles have created a financial blood bath. Millions of consumers lost trillions in net worth. People who work in real estate or investment banking have seen their livelihoods sink. And millions more Americans have lost their jobs and with them, their ability to stay afloat financially.

Well, you know what happens when financial catastrophe and water mix. You get a lot of blood in the water. And blood, along with survivors thrashing on the surface, attracts those who would benefit from misfortune—sharks.

In today’s environment, revenue-hungry attorneys or clients who are determined to recoup their losses can tear into and gut your business, chew up your net worth, and spit out your professional future.

So what to do? In times like these, your best defense is to triple-check your moral compass. If you continue to do business with a strong commitment to ethics and integrity, you will greatly minimize the odds of a “shark attack.”

However, doing business ethically is just the first step. The second is to purchase a high-quality errors-and-omissions (E&O) insurance policy that is properly designed for your type of business. Being insured won’t necessarily prevent an attack. But it will minimize the aftermath of one, allowing you to swim to shore and get on with your business and life.

However, even if you’re ethically grounded and protected with a good errors-and-omissions insurance policy, you’re still human. That means you may someday make a mistake that sheds client blood, potentially triggering a feeding frenzy. The best defense here is to E&O proof your business practices. Here are just a couple errors-and-omissions loss prevention strategies to consider:

  • E&O Prevention Strategy #1: Make sure your solicitation materials play it totally straight. You never want to misrepresent who you are, what you do, or what you sell.
  • E&O Prevention Strategy #2: Do a rigorous fact-finder and document the client needs you uncovered. Then link your recommendations to the client’s documented needs.
  • E&O Prevention Strategy #3: Educate your clients about what they bought. Make sure they understand what it does and doesn’t do, as well as all its moving parts, fees and expenses, and any underlying risks and guarantees.
  • E&O Prevention Strategy #4: Always stay in your area of expertise. Swimming in water that’s over your head is a recipe for flailing. And you know what flailing attracts.
  • E&O Prevention Strategy #5: Put everything in writing. Make sure your client file documents every key decision. Also make sure to document when clients decline important coverage, such as long-term care insurance. This will protect you from a beneficiary attack.


These five techniques are clearly the surface of a very deep ocean. But here’s the key point: Train yourself to think defensively at all times, while remaining upbeat about the great work you do.

Finally, to prevent errors-and-omissions insurance claims, don’t get out of the water. Instead, swim in the right direction (ethics), with the right protective gear (errors-and-omissions insurance), and with the right strokes (best practices).

For great pricing on E&O insurance click here.

There’s been a lot of sound and fury about annuity suitability in recent years. Concerned about inappropriate sales to seniors, many states have adopted new suitability standards for agents to follow. Not surprisingly, insurance companies want their agents to justify and document the appropriateness of their annuity sales.

What’s an agent to do? Get serious about annuity suitability by following these timely principles:

  1. Focus on being a true professional. True professionals make suitable recommendations to their clients. If they recommend products or services that serve other agendas, they are no longer true professionals Professionalism implies an agent has listened to a client’s desires, financial goals, and constraints. It also implies the agent’s recommendations fall within generally accepted standards of best practices. Being a  professional implies the agent strives to meet the client’s needs first, never his or her own.
  2. Rediscover the joys of fact-finding. True professionals don’t rush to close a sale in the first meeting. They patiently take the time to thoroughly assess the unique needs of their clients before making any product recommendations This may include following a measured process, spanning several interviews, of obtaining relevant client data.
  3. Make good use of your suitability forms. Yes, they can be annoying to fill out. But if you use them with every client, making sure to ask all the questions, you will almost always be on safe ground.
  4. Fully document your client meetings. Take good notes during all client meetings, being careful to record any information that supports your product recommendation. Also, ask and then record answers to questions such as when clients will need access to their money and/or when any income distributions will be needed. Then document their clear understanding of guaranteed features, including living benefit options. What the client tells you will help you select a financial product with a suitable surrender period, among other features.
  5. Maintain client records for five years or longer if your state requires it. This applies especially to information that supports your product recommendation.
  6. Broaden your in depth knowledge of multiple financial products to properly meet client needs. In other words, avoid becoming a “one-trick product pony.” Instead, master a variety of product solutions that address a broad range of customer needs.
  7. Help your clients understand how to get access to their money. In the case of annuities, make sure clients know when and under what terms they can access their money. Be doubly sure they sign off on-and fully understand-all surrender period definitions and potential surrender charges.

When in doubt about whether your recommendations are suitable, always do the right thing. The best defense against errors-and-omissions claims is to simply treat your clients ethically. This will prevent unsuitable sales, client complaints, and E&O nightmares no agent needs.

Visit our E&O Headquarters for more informational resources.

Misrepresentation happens all too often in financial services. Just look at the number of financial professionals cited by regulators for stretching the truth about their products. They often try to make those products look better than they are or suggest they provide benefits they don’t. In fact, we recently heard of a broker who told a prospect that a variable annuity was no different than a fixed annuity!

Ethically speaking, misrepresentation is no different than lying. And we all know lying is wrong. But what about failing to disclose information to a client? Is that a lie? Some would argue it’s an omission, not a lie, and a mere ethical glitch compared to misrepresentation.

We’re here to tell you that non-disclosure is just as serious a matter as misrepresentation. If you routinely fail to provide key information to your prospects, and you do this for your own benefit, then you are in the same position as a lobster placed in a pot of lukewarm water: totally unaware of the hot water that will soon engulf you.

So let us disclose some key information about disclosure in the interest of promoting quality service for your clients and career longevity for you.

What exactly is disclosure?

It’s nothing more than sharing facts about a product or strategy with a prospective client. The sharing of information should be robust and the goal of sharing should be to help the person weigh the pluses and minuses of the recommendation and to make an informed decision.

If you’re a life insurance agent, disclosure is particularly essential because of the nature of the life insurance contract. According to Ron Duska, professor of ethics at The American College, life insurance contracts are not negotiated. Instead, they are contracts of adhesion, which means they are devised by the insurer and must be bought or rejected by the client. Because of this, insurance companies bear the burden of educating policyowners about their contracts, a burden shared by agents since they represent the insurance carrier.

How much are you ethically obligated to disclose?

What you are legally obligated to disclose is the starting point for this answer. Certain financial licenses may require specific disclosures of business background, practices, or fees. Failing to comply with these regulations is a serious matter. But assuming you do comply with the minimum disclosures required by your license type, how much further should you go? We believe you should disclose as much as possible, especially if non-disclosure would lead a client to think you held information back for financial gain.

Obviously if you have to choose between a product that is a little better for the client, but not quite as good for you (lower commission), the choice should be clear. The client’s needs must be put in front of your own. You’d obviously disclose all the pertinent facts about that product to the client.

On the other hand if you have two products that are equally beneficial to the client. Then there is nothing wrong if one pays more commission to you. Most consumers do not mind you making money because it makes you more vested in serving them. This is especially true when that money does not come directly from their pocket as is the case for fixed annuities and most life insurance policies. Under this scenario, if the client were to ask about your compensation, you should feel free to explain the higher compensation for the reasons just described. And if the client doesn’t ask, you may still want to disclose, assuming you’re comfortable doing so.

Perhaps the general rule is this: disclose more rather than less, especially when not disclosing might cast doubts on whose interests you serve.

What exactly should you disclose?

Again, that varies by license type, but generally disclosures fall into four basic areas.

  • Information about the product clients are considering purchasing, including specific details that define how the product works, its material risks, and its future performance.
  • Information about the carrier that will provide the product, including carrier ratings and track record.
  • Information about the application and any underwriting process, especially about the risks of providing false medical information for health, life or disability insurance.
  • Information about the specific product illustration provided in your sales presentation, especially the difference between future values that are projected vs. guaranteed.
How should you document your disclosures?

Professor Duska provides some excellent advice here. He suggests you document three things:

  • The reason for the product recommendation, including specific facts that led you to conclude that the proposed product was suitable for the client.
  • Copies of any illustrations upon which the sale was made, including the client’s signature.
  • A disclosure statement, which briefly defines the key product features, benefits, costs and term period, again with the client’s signature.

We’d also add one additional item that can prevent a lot of grief if your client passes away and you begin dealing with beneficiaries. That would be a document that defines the client’s wishes regarding the disposition of funds relating to beneficiaries. Because beneficiaries often challenge the decisions of their deceased parents, it’s best to document those decisions very carefully in writing while the parent is still alive.

What do you stand to lose and to gain from full disclosure?

When you disclose fully, you may lose some commission dollars or maybe the sale itself. But you stand to gain much more from the stronger client trust—and more solid relationship—that will ensue. Never take a short-term view on ethical issues such as disclosure. The power of ethical conduct only becomes evident over the years as your reputation builds and begins to pay dividends such as more referrals, longer client retention, and higher income.

Perhaps the strongest case for full disclosure is the positive affect it has on one’s stress level. When your default position is more disclosure, not less, then ethical quandaries and self-disputes vanish, and you just do what comes naturally. Plus, when your philosophy is to share fully with clients, you will experience the serenity that comes from educating the client and letting the chips fall where they may. Whether you make more or less money as a result, you still win!

So here’s the bottom line: Don’t skimp on disclosure. Get serious about sharing information with your clients. I promise you they will reward you with trust and loyalty beyond measure.

Visit our E&O Headquarters for more informational resources.