Wall Street is often compared with a casino. Unlike a casino, when people lose money they often think suing the house to get it back is a good idea. The financial advisor often gets caught in the middle. Here’s another issue: We often think of life as black and white. There’s often a lot of grey in between. Lawyers often use the expression, “That’s a grey area.” Like quicksand or riptides, by the time you discover you are getting into trouble, it might be too late.
1. Have a problem, get a partner. Because you’ve never seen this situation before, you might assume it’s unique to you. That’s often not the case. When working with clients, you sometimes get the feeling something “isn’t right.” Sit down with your compliance manager and explain the situation. The manager is now your partner and will tell you how to proceed. You might feel you are walking away from easy business, but are likely avoiding a much more expensive problem in the future.
2. Recordings. Years ago, we recall hearing you can’t record a phone conversation without both parties consent. Your firm might have a recording that says calls are recorded for quality and training purposes. Your concern is what’s happening on the other side of the conversation. Always assume the conversation you are having is being recorded. If you have a dispute with a client, they might come back with “but you told me…” and have a recording to prove it.
3. The WSJ and NYT test. When I started in the business, my manager explained “Don’t do anything with a client you wouldn’t want to tell your mother about.” On other occasions he would say: “Don’t do or you anything you wouldn’t want to read about on the front page of the Wall Street Journal or the New York Times. Although this sounds unlikely, we knew a person who had an issue with a mutual fund company. She complained to the company, going up the chain of command. She didn’t get the problem resolved to her satisfaction. A couple of days later, I read about her situation on page C-1 of the Wall Street Journal. You never know which direction a situation might take.
4. Keep records of conversations. Your firm has invested in a CRM system, enabling you to make notes about conversations and also attach documents. Make the best use of this technology as you can. I worked as a financial advisor for years. I’ve been with our current financial advisor for more than 25 years. She regularly offers to sit down for a face-to-face portfolio review. We try to do this annually. There have been times when we have passed on the opportunity, even after we’ve been reminded every three months. There’s a notation in our records we were not only offered (and declined) an annual review, but the offer was repeated (and declined) on subsequent dates. This information can be useful if the client later complained they had no idea what was going on.
Years ago, people only saw the doctor when they were sick. Gradually, health care moved to the preventive medicine model. You see your doctor for your annual physical. The idea is to catch problems early before they become difficult to resolve. From a compliance point of view, the financial services industry operates on a similar system, seeking to identify problems early before too much damage is done.
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, Captivating the Wealthy Investor, is available on Amazon.