Solve client complaints before they head to regulators

Clients and regulators are asking a lot of you. But they don’t always know what you do.

“Over the past decade, there has been an increasing muddying over the four pillars of the financial services industry,” Lawrence Geller, president of L.I. Geller Insurance Agencies, told the Advocis regulatory affairs symposium this week.

There’s less distinction between banks, trust companies, insurers and securities dealers as each pillar ventures into the others’ territory, he says.

“This has resulted in a great deal of confusion for consumers, their legal and accountancy advisors, as well as for regulators. There is no longer a level playing field where a consumer can expect the same type or nature of regulation of everyone who sells them different types of product,” he adds.

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The trend in the industry is toward extreme compliance, adds Barry Papazian, partner at Papazian Heisey Myers.

“In the MFDA area, it’s getting very, very aggressive in terms of the review of complaints that are coming in,” he says.

He adds some regulators are now initiating reviews based not on complaints, but on the findings of other watchdogs.

But standards keep changing, says Geller. And regulators tend to judge advisors’ past actions using today’s standards, he adds, instead of the rules in place at the time the client purchased the product.

Standardization of regulation across financial sectors would be helpful, especially for advisors who hold multiple licences, says Ralph Cuervo-Lorens, litigation partner at Blaney McMurtry.

Many disputes stem from conflicts due to the advisor’s dual role as advisor and salesperson, he says. “It’s extremely difficult to manage the inherent tension of those two things,” he adds.

“I can look at a dispute and see where the advisor has lost sight of that distinction…and I can see the result in that, which is usually trouble, because someone will be suggesting that they did too much of one and not enough of the other,” he notes.

How to handle a complaint

Often, a client will take her initial complaint to her advisor, says Wade Baldwin, a Sun Life advisor at Baldwin and Associates in Calgary. Use this opportunity to work with your team to solve the problem before it escalates.

Examine the complaint yourself and determine whether you made a mistake, says Cuervo-Lorens.

“If you have screwed up, then by all means just say so,” he says. Apologizing doesn’t always mean that you’re liable for the mistake, he adds.

Communicating with the client after she advises you of a serious problem also helps diffuse the situation and hopefully prevents it from turning into a formal complaint, he says.

“If you respond by clamming up…All that kind of stuff is just escalating it,” he says.

If you’ve looked back at your records and found you aren’t at fault, re-sending the email in which you outlined a client’s options and decisions could resolve the dispute, says Geller.

Ideally, you would have run through the key points of a meeting with a client before it ends, says Cuervo-Lorens. “That will catch the miscommunication that is often the source of these problems.”

Says Geller, “It’s amazing how quickly a complaint can turn into an apology to an agent when clients realize that they had an opportunity to see everything in advance and that they made an informed decision.”

Read: Are regulators doing their jobs?

If the client’s problem isn’t with you, but with the insurance provider or fund manager, then offer to help the client navigate the system, says Geller, even if your role may not formally include that responsibility.

In the case of a formal complaint, the regulator will come to the investigation with a cookie-cutter approach, says Cuervo-Lorens. So ask to sit down with an investigator early, before they form an opinion of you or the complaint, to explain your process, he says.

“Oftentimes the investigator will appreciate that you’ve taken the time, because it makes their job easier,” he explains.

If the case ends up in court, you will be at a disadvantage, says Papazian.

“Very few judges understand insurance. Very few judges really understand investments,” he says. “If you’re in front of a judge, you can be sure their sympathy will be with the claimant. They have a grievance and it will be our job to reverse that presumption.”

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