Your clients count on you for solid financial advice. If you don’t provide it, your clients may experience avoidable losses – and you could be sued.
With new fiduciary standards going into effect on June 30, meeting your ethical and legal responsibility to help your clients is more important than ever. And because a paycheck is a person’s most important resource, offering paycheck protection should be part of the process for every financial planner, insurance agent and broker.
A New Fiduciary Standard
Starting June 30, 2020, the Certified Financial Planner Board of Standard (CFP Board) will enforce its new Code of Ethics and Standards of Conduct.
These standards state that that CFP professionals must act as fiduciaries as at all times when giving financial advice. This means they must act in the best interest of their clients. Additionally, CFP professionals must carry out three duties:
- A duty of loyalty
- A duty of care
- A duty to follow client instructions
According to Financial Advisor Magazine, the new standards mean that CFP professionals are required to act as fiduciaries whenever they are providing advice, and that financial advice may include any recommendation to purchase, hold or sell a financial asset. This is a very broad definition, and the standard applies to brokers and dually registered advisors.
The new standard represents an important update for all CFP professionals. It also demonstrates evolving attitudes regarding the fiduciary responsibilities of insurance brokers and financial advisors.
Simply put, a lot is expected from you. Here’s how you can rise to the challenge.
Protect Your Clients
The CFP Board’s new Code of Ethics and Standards of Conduct is rather detailed, and CFP professionals should read it carefully to understand all their obligations.
However, here’s one rule of thumb that you can follow: Make sure you’re doing everything you can to protect your clients’ finances.
For most workers, the paycheck is the foundation of financial stability. If the paycheck disappears, everything that’s built upon it – the house, the cars, the savings – can crumble. Given this, it makes sense that people should take steps to protect their paycheck just as they would protect their other assets.
Look out for your clients. Educate them on the true value of disability insurance and help them see why coverage is in their best interest.
And Don’t Forget to Protect Yourself
You have a responsibility to act in the best interest of your clients, but you can’t force clients to do what you think they should. In the end, they decide whether to purchase coverage.
You may think that by offering coverage, you’ve fulfilled your duty – but watch out. To be hit with an E&O lawsuit, you don’t have to make an error or omission; you just have to be accused of doing so.
Imagine the following scenario. You offer disability insurance and explain its value, but the client rejects coverage. A year or so later, the client experiences an illness or injury and is unable to work. The client regrets not having disability insurance and thinks you must not have explained the risk clearly. You know you did, but now you’re being sued, so you’ll have to find a way to prove this in court.
There’s a way to avoid this sort of he said/she said nightmare. Have clients who reject DI coverage sign a waiver.
Want to get the DI Waiver and learn more about protecting your clients and your career? Download the “Are You Leaving Your Clients BARE?” report today. Also, download our “Cake” infographic. This sales tool illustrates why DI is foundation of all solid financial plans.
If you’re not confident selling disability insurance products, contact us to learn how we can help.