Preserve Your “Full Faith and Credit” to Prevent Lawsuits
In recent years, there’s been a lot of talk about America’s budget deficit and mounting debt. The great debate over our budget has us wondering about the meaning of the term “full faith and credit” . . . especially how it relates to the ethics of selling and the importance of reducing business liability today.
The term “full faith and credit” actually has a specific legal meaning. It refers to a specific clause in the U.S. Constitution that requires all states to recognize the legislative acts, public records, and judicial decisions of the other states. It was hoped this would unify the country, yet give the states proper autonomy.
Over time, though, “full faith and credit” has been used in many other contexts, including the notion that the U.S. unconditionally guarantees its financial obligations. Regardless of your political ideals, you have to wonder about the wisdom of doing anything that damages that faith. Because once a government loses public belief in its financial integrity, it’s tremendously hard to rebuild trust.
In much the same way, financial advisors have their own “full faith and credit.” Your clients agree to do business with you because they believe you are competent, will provide suitable solutions, and guarantee to be there for them when they need service. They believe that you have integrity and will do the right thing, unconditionally.
Yet anyone who reads the business media knows that financial professionals sometimes act in ways that erode that faith. Big lapses like soliciting for Ponzi or pyramid schemes. Little things like being sloppy with paperwork or failing to return phone calls. And everything in between, from selling unsuitable products and misrepresenting product features to not staying current with product trends and giving lackluster advice. With each ethical transgression, a client’s faith in an advisor’s integrity weakens. What started out being unimpeachable develops fissures over time, inevitably crumbling in disgrace. And when trust dissolves, lawsuits are never far behind.
So how to you maintain your own “full faith and credit”? Here are some steps you can take:
- Do everything by the book. Make sure your marketing and administrative practices are locked down tight.
- Do business with professionalism. Part of this depends on you knowing your stuff. The other part depends on you acting with unconditional int
- Exceed client expectations. Be sure to set—and reset— client expectations as needed.
- Communicate, communicate, and communicate with your clients. And when you’re done, communicate some more.
- Always do what’s best for your clients. Never forget that it’s about them, not about you. In short, whatever your business, adopt the mindset of a true fiduciary. This is the ultimate strategy for reducing your business risks. Do this and hopefully you’ll never need to use your errors-and-omissions insurance policy.
