Question

Financial Planning-

When giving financial recommendations, the couple you have advised are not happy with the required premiums.

What steps could you undertake to protect yourself against future litigation on the basis that the couple do not decide to take up your recommendation?

Answer 1

Financial advisors have an important role in the financial planning of individuals.Advisors may make recommendations on investment,insurance etc.

In this case the clients are not satisfied with the premium and seems not to take up the recommendations of the advisor,Hence there are certain steps that could be taken by the advisor to protect themselves from future litigations.They are:

• Get accurate information.: As an advisor it is necessary to get the full picture of the client through records like tax returns and bank statements.It i his duty get the creditworrthiness and all necessary details even if the client seem reluctant,they should find ways like questionnaire to get the informations.

• Proffessional disclosure:You act on the best interest of the client and its your duty to provide them with all information regarding any investment or insurance or anything.Client need to know that any past ,present or future conflicts of interest or the risk involved in the methods used to determine the investment's suitability.All of this information should be compiled and to be duly signed by the client.

• Avoid high risk clients:Its not necessary to takeup all the clients.You might not want to get involved with a client who is reluctant to cooperate.these situations may put you in stress andmay lead to litigations.  

• Getting liability insurance:Financial advisors need error omissions insurance to protect themselves from risk.By covering certain losses if you are found at fault prper liability insurancecan keep you safe from lawsuits.

• Keep client information safe:Its your duty to be deligent about the large amounts and the security of them.Follow practices for keeping the client information safe for maintaining the trust of the client.

• Provide investment policy staments to clients: You want your client to understand why you are recommending that they put their money in,.Require your client to sign off on the plan before you touch their money.

• Dont force clients to invest on the investment that they don't understand:You should never push aclient to an investment that could later be feel to be cheated or mislead.

• Follow up:Checking in client allowws you to stay on top clients portfolio and investment strategy.Its makes a good advisor when engaged with clients.

• Mediation: it is an informal process where a neutral third party help you and your client find a mutually agreeable solution which is cheaper than lawsuits,when a client threaten to sue you.

These are the various measures which can be taken by an advisor.Even the advisors are clueless about market conditions which can affect the productivity of their investments which can also make them liable.Hence the above precautions are to be taken by ever advisor.