Putting Your Client First – Is a PRACTICE, Not a License!

By Kim O'Brien InsuranceNewsNet

Now that we have a delay with the DOL Rule until June 9, it raises an important question – what to do with the extra time? AssessBEST suggests advisors should use the time to incorporate a Client-First standard into their practice.

And it’s EASY!

Most advisors tell us they already know their client’s financial needs before they recommend a product. But that will not be enough now that the fiduciary standard has been widely promoted and your competitors are preening over their fiduciary status.

As a qualified expert witness on annuities, I am seeing an alarming trend in many claims made to the court. Two recent cases included claims of “excessive compensation” and “conflicts of interest.” These are two claims that might typically be in a breach of fiduciary duty case and not a suitability of an annuity case.

That doesn’t stop the plaintiff’s bar from litigating. Both cases were “settled,” but not before much money had been spent and time wasted.

Most of the firms affected by the Rule are already moving forward with the spirit of the Rule’s requirements in place. Others who are already licensed or designated fiduciaries are exploiting their status and promoting their fiduciary credentials.

One firm has changed all business cards, letterhead and website landings to highlight the fact they are fiduciaries to “get a marketing advantage over non-fiduciaries.”

While it may feel daunting for those who aren’t fiduciaries - it shouldn’t be! You don’t have to be under a regulatory requirement, license or designation to put your client’s interest first. And, many of your competitors don’t have what you have - annuity and life insurance expertise.

There are three key elements of a Client-First Business.

THREE Client-First Best Practices

1. Client Assessment Tool
A recent study by Greenwald & Associates states that only 19 percent of consumers report their advisor is discussing annuity income strategies!
All planners, regardless of license, must adequately address insurance needs in a financial plan to meet the highest standard of client-first advice. A professor in financial planning shared that most needs-analysis tools available today do not do an adequate job of discovering insurance gaps for guaranteed income and protection in an individual’s financial plan. Make sure your practice includes an insurance needs analysis component.

The underpinning of client-first practices is understanding your client’s planning time horizon and financial needs and concerns. A thorough needs analysis tool that uncovers all is critical. Also, assessing the client’s financial goals and needs first is essential to demonstrating that you are putting their interests ahead of your own. A product-first approach will make it difficult to support you are putting your client’s interest first.

Risk tolerance is not only a key to a suitable and best interest product recommendation, it is an essential component in determining the diversification and protection needs of your client.

2. Record Retention and Documentation Protocol
Records are key to help you support any product recommendation today and in the future. Most claims of unsuitability or fiduciary breach are won and lost on documentation. Not only must you document the goals, concerns, risk tolerance and time horizon (which all suitability forms require), you must record how you determined them.

What were your client’s specific comments about their financial situation and how did you arrive at your product recommendation. A practice of client affirmation (initials or signature) of your planning process and findings is a critical step in supporting your product recommendation.

3. A Cyber-Secure Environment
Most people tend to fear what they do not understand, especially when it comes to new technologies. Also, many feel that if they can control the data it is more secure. That is a myth. Control does not mean security.

While doing research for our sales and compliance system, we learned that on-site system security can be unreliable and difficult to implement. They include the terminal, workstation and browser. In most offices, a locked door is the main defense to protect IT equipment, important files, and personal- and business-related data.

In contrast, the top cloud service providers’ (CSP) data centers have multi-layered security defenses. Precautions include high fences, barbed wire, concrete barriers, guards that patrol the area, and security cameras. These physical barriers not only prevent people from entering the data center. They also monitor activity near the space.

When data is stored off-site in the Cloud, employees, vendors and visitors are physically separated from a company’s mission-critical data. This lack of physical access makes it more difficult for third parties or a disenfranchised person to use data negatively. The amount of human risk decreases.

Our new world of heightened regulatory oversight and litigation requires today’s insurance advisor to utilize a standardized needs-analysis process that is consistent and reliable for all clients. A systemized, repeatable process will demonstrate and record client-first practices and procedures.

Use your time during a delay wisely. Turn your practice quickly and painlessly into a CLIENT-FIRST model! It will put you ahead of your competition, close more sales and increase your client retention ratios!

Kim O’Brien is a 35-year veteran of the insurance industry specializing in guaranteed annuities and life insurance. She is the current CEO of Americans for Annuity Protection and Founder of AssessBEST, Inc., a sales and compliance software system. Visit www.AAPnow.com or www.AssessBEST.com for more information. Contact Kim at [email protected].