Lawsuit Protection Best Practices

[DHK]

With all the stories about these questionable practices with annuity agents, and with politically aspiring District Attorneys... I think this information is VERY timely.

I follow Steve Savant on LinkedIn. His latest shows are with an attorney that targets and sues insurance agents.

If you're not doing these things, perhaps you should look into improving your best practices:

How an engagement letter may protect you from litigation:
https://www.youtube.com/watch?v=BnK1kvBAKb8

Taking notes may insulate your business in arbitration:
https://www.youtube.com/watch?v=z2smCE5KWq8

Why attorneys target advisors and not companies or policies:
https://www.youtube.com/watch?v=Dyv4PSDGbdk

Why calling yourself an expert may expose you to damages: (And a short discussion on how being a captive agent can be in your best interest for understanding your product line the best and that is a good position to be in.)
https://www.youtube.com/watch?v=8naJmCd-swo

Why clients win lawsuits against their financial advisors:
https://www.youtube.com/watch?v=PJwNa3tw6r8


A key phrase I took from one of these segments: "quasi-fiduciary". That's scary, but it's a part of a professional duty that this attorney talked about.

You're not paranoid if they REALLY ARE out to get you!

----------

I wonder if anyone here uses an engagement letter of some kind?

If so, if you would share it, I would appreciate it as a model to craft my own.

Thanks!

 

[scagnt83]

A key phrase I took from one of these segments: "quasi-fiduciary". That's scary, but it's a part of a professional duty that this attorney talked about.

You're not paranoid if they REALLY ARE out to get you!

Yes that is going to be an increasingly heard term in our industry, especially when dealing with IRAs and Retirement Plans.

IRAs are technically part of the ERISA code, which is regulated by both the IRS & the DOL.

The DOL has recently been making changes to their definition of Fiduciary Duty, and who and what that encompasses.

But the IRS has an extremely broad definition of "Fiduciary" and who might fall under that category:

"Plan Fiduciary – Anyone who exercises discretionary authority or discretionary control over management or administration of the plan, exercises any authority or control over management or disposition of plan assets, or gives investment advice for a fee or other compensation with respect to assets of the plan."

Yes the definition says "Plan", but IRAs are technically a type of Retirement Plan.

An advisor on a Pension Plan was recently fined $1mill by the DOL for breach of Fiduciary Duty.... the regulators do not take it lightly these days.


Fiduciary related litigation (and regulatory actions) are rising at an alarming rate. There are even lawyers putting ads on google these days with wording like "do you loose money in an annuity and feel you were mislead?" It is worse than ambulance chasing.

 

[CALTCAgent]

I like how the prosecutor said, the "paperwork" protects the insurer, not the agent.

We should have notes and have the client sign those notes. I am all for that, but those will then be used against you.

I believe Glenn Neasham had a CYA letter. It was used against him, I believe.

Its a whole new world for agents.

I think if something passes suitability, then we don't monday morning quarterback it years later. To protect the consumer, it should not be allowed from the start, IMO.

 

[DHK]

I remember that. I think the rationale was "why do you need a letter if you know it's not suitable" or something like that.

My "take-away's" for everything:

1) You have a license, which subjects you to a professional duty above just selling a product.

2) Define your professional relationship. What are you responsible for, and what is the client responsible for.

3) Take notes and document all conversations. (She said it didn't have to be "copious" notes, but I document everything - phone calls, emails, notes, everything. This is my primary reason for having a CRM like Act!)

4) Be pro-active if you made an error. Contact the client and take the steps to make it right.

5) Return calls back to your client when they call you. (Even if it's just to acknowledge that you got their message and you're going to research the issue.)

6) If you're going to be an expert (above and beyond a product salesperson), back it up and hold yourself to the higher level of professional level. In short, if it can be implied that you provide a certain level of expertise and care... you are liable to that level.

7) If you work with a team, and count on that team for input and feedback on cases... trust, but verify.

8) It's probably best to represent FEWER companies and know their products inside and out... than lots of companies with multiple products.

9) Review with the client what they're actually signing. Don't just say "sign here" without any explanations.


To me, there's no difference in liability between investments and insurance professionals. There's a difference in licensing, regulation, and compliance requirements... but not a difference in liability as it relates to working with the public.

 

[DHK]

Some updated videos on this subject:

Why Litigators Target Advisers and Not Companies & Contracts - Thought Leaders

Why Calling Yourself An Expert May Increase Punitive Damages in Litigation - Thought Leaders

Why Client Interviews Should Include Note Taking & Financial Information - Thought Leaders

Why Clients are Successful in Arbitration & Litigation with their Advisers - Thought Leaders


Why A Client Engagement Letter is An Adviser’s First Line of Defense - Thought Leaders