The Best Way to Protect Yourself from Customer Complaints

Are you so busy adding new clients and serving existing ones that you never learned about the ways E&O insurance can benefit your business? We thought so. But don’t worry. It’s never too late to protect yourself with high-quality and affordable E&O insurance.

Now, we understand that for some financial professionals, this is a counter-intuitive statement. That’s because they believe their risk of getting sued is quite small. Plus, they also assume if they do get sued, they’ll be able to resolve the matter amicably by making a financial settlement with their aggrieved client. We’re here to tell you those two assumptions are false, and that believing in them can potentially destroy your business.

First, every year, tens of thousands of financial-services clients sue their advisors.  Many times the advisors deserved to get sued because they made a serious mistake. Of course, a significant percentage of lawsuits fall into the nuisance category. They come from individuals with unrealistic expectations of how financial products work or who are looking to score a quick payday at their advisor’s expense. Therefore, even though your risk of getting sued is quite low, you can still get sued. And if you do and have no E&O insurance in force, your business will be in jeopardy.

Second, financial advisors clearly are talented and know a lot about their products, financial markets, and the needs of their customers. But what they may not understand are the nuances of human nature; they may not fully grasp the depth of a client’s anger over a real or imagined problem. And angry clients are prone to hauling their advisors into court—and unlikely to settle without a large cash incentive.

How to best protect yourself against customer complaints?

Start by having a process in place for responding to customer complaints. Your insurance FMO or securities broker-dealer likely has a procedure to follow. Familiarize yourself with this process and adhere to it carefully once a client’s intentions become known.

If your FMO or BD lacks such procedures, then develop your own. Key elements should include:

  • Ceasing communications with the client until you find an attorney to speak on your behalf. If you have E&O insurance, your insurance company will provide you with a capable lawyer at no cost to you.
  • Collecting all relevant documents pertaining to the matter under dispute.
  • Developing a written account of the conflict, based on input from all individuals in your firm who dealt with the client.
  • Not mentioning you have E&O insurance.
  • Not offering money to make the problem go away.
  • Filing a notice of claim with your E&O insurance company. If you don’t have an E&O insurer, then you’ll have to find and pay for your own attorney.

However, complaint prevention will always be the most powerful protection technique for your business. Do this by:

  • Always being properly licensed for every product you sell.
  • Knowing the features and benefits of your offerings in great detail and sharing this expertise with your customers during the sales process.
  • Setting proper expectations with clients regarding product results during various market conditions.
  • Having a strong on-boarding process so clients have realistic notions of the services you provide after the sale.
  • Having multiple methods available for clients to contact you, especially during times of market volatility.
  • Being perceptive to changes in client behavior resulting from a perceived error or omission on your part.
  • Responding quickly to signs of client discontent to make sure you understand what went wrong and to quickly make things right.

By adopting these measures, you will effectively mitigate your risks of getting sued. But the best protective strategy of all is to have a high-quality E&O insurance policy in force.

What is E&O Insurance and How Can It Benefit Your Business?

E&O insurance is similar to many other forms of insurance. It protects you against the negative impact of a financial loss. In this case, it provides money to pay for an attorney as well as to make good on any legal judgment against you should you lose your case in court. E&O policies have ancillary benefits that make them even more advantageous to financial professionals. However, these two core features of cash to pay for legal advice and money to discharge a legal judgment are the most important benefits of E&O insurance.

The benefits of having E&O protection are plain to see:

  • With E&O insurance in force, you eliminate financial uncertainty from your business and your life. When you buy a policy, you essentially trade a large, unknown financial risk—the chance of getting sued and the resulting cash payments—with a predictable recurring expense (your E&O insurance premium). Most financial professionals agree that replacing a large unknown risk with a fixed, ongoing expense makes a lot of sense.
  • You also get help managing the process of resolving a legal dispute—from an insurer-provided attorney and claims adjuster. Without the help of these two individuals, you would have to manage the process entirely by yourself, which makes it hard to keep working in and on your business.
  • Eliminating uncertainty and getting help during a crisis greatly reduces the stress and worry of dealing with unhappy clients. Why manage such situations by yourself when you can call on your E&O insurer for assistance?
  • Finally and most importantly, the key benefit of having E&O insurance is that a large legal judgment won’t put you out of business. As long as you have sufficient limits in your policy, your E&O insurer will pay for any legal judgments, damages, and court costs resulting from your loss in court.

Errors & Omissions Insurance is Designed to Protect Your Bottom Line

At the end of the day, errors & omissions insurance is designed to protect your bottom line. It makes sure your business can continue operating during a legal crisis—bringing in new clients and revenue—rather than scaling or shutting down. If you need income from your business to pay for current expenses and to help you save for the future, then self-insuring against E&O claims is a risky strategy, indeed.

In summary, your bottom line is what’s at stake. If you take proper steps to protect it now with E&O insurance, you will be ready for any future contingency. Doesn’t it make sense to not only grow your firm’s financial resources when times are good, but also to protect them against potential external attacks? Of course, it does!

If you already have E&O insurance, take a look at your policy now to make sure it still meets your needs. If it doesn’t, take steps now to secure coverage from a reputable E&O insurer. To speed the process of getting insured, consider selecting an online provider such as Using our user friendly website, you will be able to shop, apply, and pay for your policy, as well as print out your proof of insurance, in just a few minutes. What are you waiting for?

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