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The truth is becoming a rare commodity in business these days. In fact, misrepresentation and fraud in financial services is a symptom of a larger pattern of deceit in every corner of American life. Consider these facts:

  • Forty percent of Americans think it’s OK to lie (Ipsos survey, 2006).
  • People lie about 11 times a week, according to Anita Kelly, Ph.D., a psychology professor at the University of Notre Dame.
  • America’s young people are often dishonest, according to the Josephson Institute. Its Integrity Survey found that 38% of young people ages 18-24, and 51% of those 17 and under, believe they must lie and cheat in order to succeed.
  • Labaton Sucharow (a New York law firm) says that 24% of financial professionals believe that unethical or illegal conduct is par for the course.

Voters aren’t the only people who lose faith when lied to. Your customers—the people you rely on for your livelihood—have zero tolerance for industry falsehoods. When lied to repeatedly, they began to mistrust advisors and companies, disbelieve their recommendations, refuse to buy their products, and tear down their reputations. In short, lying to consumers is not only unscrupulous and morally repugnant, it’s a death trap for your reputation and practice.

So what to do about it? Commit to a new level of care: The Truth Standard. Added to the existing Suitability and Fiduciary standards, it would require 100% adherence to fact-based communications, including . . .

  • no longer allowing misrepresentations or omissions about a competing advisor, carrier, or product.
  • banishing fear mongering about the viability of Social Security or the guarantees of the Federal Deposit Insurance Corporation, among other issues.
  • requiring advisors to come totally clean about their professional expertise and training.

Sound refreshing? You bet! So be sure to read E&O HQ articles for further details. For now, follow these guidelines for injecting more truth into your client dealings—and reducing your E&O insurance risks:

  • Never tear down a competing advisor, product, or carrier unless you can provide facts.
  • Don’t prey on senior fears about Social Security, FDIC insurance, or Medicare/Medicaid. Instead, use facts to promote senior understanding.
  • Be fully transparent about your license, business model, and compensation.

For more information on reducing your errors-and-omissions insurance risks, visit National Ethics Association’s E&O Headquarters at EOforLess.com.