E&O Insurance protections

The Era of the Handshake Deal is Long Gone

Sad to say, the era of the handshake deal has passed. Decades ago, it took only a signature and a handshake for a financial professional to close a sale with a prospect. Those were the days when a person’s word meant something. Advisors would do their best to make suitable recommendations, clients would accept those recommendations in good faith, and a handshake would ratify the advisor/client relationship, which often lasted an entire lifetime.

Boy, have things changed! Now, closing a sale requires jumping through numerous compliance hoops. Both advisor and prospect must sign multiple forms: replacement, risk profile, suitability, and soon, family contact (for reporting of suspected senior abuse). All of this dotting of I’s and crossing of T’s has made the sales process more legalistic and adversarial. Result: the implicit trust financial professionals and their clients quickly established is now more fleeting. In short, the assumption today is that each party, given half an opportunity, is out to victimize the other, and that each has to adopt a defensive posture from the outset.

It gets worse. This compliance process makes the sales process longer and more complicated. And it gives prospects more opportunities to back out. But there’s an even larger issue at stake. By making the sales process more legalistic, companies have trained consumers to expect the worst. And when mistakes happen, consumers are more likely to feel aggrieved and to take legal action.

For this reason, even though they may feel their clients are reasonable, financial professionals must protect themselves against risky individuals who react negatively to problems real or imagined. This means purchasing high quality, affordable errors-and-omissions insurance from firms such as EOforLess.com, which works with financial advisors.

What Does an Errors & Omissions Policy Protect You Against?

Errors-and-omissions insurance is the answer for financial professionals who wish to build a sustainable business in this environment. Because there are more angry clients and lawsuits these days, advisors simply can’t afford to go uninsured.

What does an errors & omissions policy protect you against? Simply put, it generates funds that help advisors deal with the aftermath of making a mistake (or failing to act) that harms a client. Policies are designed to provide cash to hire an attorney to defend you and to make good on any judgments or settlements that emerge from a judicial process. They also pay for court costs and the fees incurred in finding and retaining expert witnesses.

Now, you may be thinking, “I know how to do my job and the chances of my making a mistake are slim.” We have two responses to that.

First, financial professionals are human, and as such, susceptible to making errors, period. They have lots of things on their plates and might forget to handle an important transaction for a client.

Second,  one of their staff members might drop the ball, financially harming a client. The possibilities are endless. For example, life and health insurance agents might recommend the wrong annuity for an elderly client or fail to stay on top of a customer’s changing needs for life insurance. Or they might neglect to execute a client request, which ends up costing the person money.

Similarly, on the property-casualty side, there are countless ways to make a mistake, including failing to . . .

  • secure appropriate coverage,
  • recommend policies with adequate limits, or
  • properly explain coverage exclusions or policy limitations.

Whatever the mistake, and whatever your license type, the combination of existing advisor/client chemistry, client anger, and financial loss can quickly explode into a damaging lawsuit. When this happens, you need an errors-and-omissions policy (and insurer) to preserve your precious financial assets.

Protect Yourself Against Negligence Claims

Given the high number of risks for getting sued today, it’s imperative to protect yourself against negligence claims. How? By assessing your needs for errors & omissions insurance and by selecting an affordable solution that meets those needs. As a first step, we recommend evaluating the policies available from EOforLess.com, an online shopping service for financial professionals.

Unlike working with a traditional E&O insurance broker, which involves filling out complex applications and waiting days or weeks for the broker to secure a quote from several insurance companies, buying errors & omissions from EOforLess.com typically takes 5 minutes or less. You simply . . .

  • visit our user-friendly website,
  • select your policy type and desired insurance coverage amount,
  • complete the application,
  • pay for the insurance, and
  • immediately print out your proof of insurance.

Nothing could be easier than purchasing E&O insurance from EOforLess.com.

In summary, everyone wishes the “good old days” came back—a time when advisors and their clients trusted each other and sealed deals with a handshake. But that time is gone forever. Now, consumers must do adequate due diligence on their financial advisors, and advisors must protect themselves against litigious clients. For financial professionals, this starts with protecting their current assets and future earnings potential with errors & omissions insurance.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!