Bad things do happen to good advisors, warns Advisor’s Edge

(March 9, 2004) So, you think the only advisors who get sued are the sharks, swindling little old ladies old of their retirement savings? Think again.

“Yes, Virginia, you can get sued — it can happen to you,” says Deanne Gage, managing editor of Advisor’s Edge. “We thought it was very important to have a special cover package that looks at advisor liability, because there are a lot of advisors think they are invincible.”

She points out that good advisors can be sued and that a simple oversight could be to blame.

“The first story looks at how you can make sure you don’t get sued, or if you do get sued, you have a proper defence prepared because you’ve stayed on top of your information, documented everything, read the fine print of the products you’re selling,” says Gage.

The second article is by compliance columnist and lawyer Ellen J. Bessner. She looks at how an advisor can build a paper trail that will serve them in court.

“There are ‘five Cs’ to the paper trail: Correct, current, complete, consistent and contemporaneous,” says Gage. “Bessner discusses how important it is to follow all five of these, because if you’re only following one or two, it’s not going to look good in the eyes of the judge.”

Advisor.ca news editor Doug Watt wraps up the package by exploring errors and omissions insurance.

“A number of advisors don’t even have this product to prepare themselves if they do get sued. It can certainly make sure that you don’t end up in the poorhouse,” says Gage. “As for the actual policy that you sign up with, you have to make sure that it covers what you actually practice. For example, financial planning tends not to be covered by a lot of these policies, but a few of the associations do cover it.”

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“Beyond the Plateau” is a practice management story about the advisor who wears so many hats they can no longer build their practice. Advisor Mounir El-Ayari suggests outsourcing the money management side of your practice will lead to a leveling off in the number of clients, with the advisor spending too much time on money management and not enough time on the client relationship.

“Often what ends up happening is they become weak in a certain area and strong in another,” says Gage. “It’s really important to focus on your client. The money management could be outsourced to a third party, or client service is going to ultimately end up suffering.”

And speaking of building your client base, Dan Richards’s column looks at prospecting and referrals. This was been identified in The ADVISOR Group’s 2nd annual Dollars & Sense Survey as one of the greatest day-to-day challenges for advisors.

“In the next few months, Dan will walk us through the various steps to growing your client list, starting with referrals and the process you can have in place for winning them,” says Gage.

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How are you protecting your practice? Have you ever been sued? How did you prepare for your defence? Share your thoughts about this topic in the Talvest Town Hall on Advisor.ca.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

(03/09/04)

Steven Lamb