HOW FINANCIAL ADVISORS MINIMIZE THEIR OWN RISKS
If you think financial advisors can reduce their own risks easily, think again. An advisor finds it more difficult to manage their finances. They are in the business of helping their clients. So, advisors are expected to practice what they preach.
How do financial advisors minimize their own risks?
Several advisors presume their clients understand some principles in handling their finances. Instead of depending on assumptions, establish a good communication with clients. Check their progress in reaching their overall financial goals. Tell them when you have accomplished some tasks for them, as well as remind them of important deadlines and regulatory changes.
It is imperative to document everything, including interaction with clients. Putting everything in black and white gives you an insurance policy against any lawsuits in the future. One cannot prevent someone from filing a case against you. But, documentation can give an advantage when it is your word against theirs.
Good financial advisors avoid giving off-handed advice, even if the client is their friend. Whatever comes from your mouth is already considered an official recommendation. If a person wants to get your financial advice, make that person your client. You can be friends with them. Still, draw a line between your professional and personal relationship.
Nothing is wrong with unwinding and socializing every now and then. But as a professional, one needs to be trustworthy and project a good image. Your actions in public can affect you and your business, either in a good or bad way. Whatever you do with the four corners of your home is none of their business. However, one has to be vigilant in protecting his or her reputation.
Advisors, it is important to take continuing education. Many advisors take courses as fast as they can to go back to work the soonest time possible. If you are serious about minimizing the risk, pay attention and absorb the lessons being discussed in the courses you take, especially new regulations. An advisor who is not updated on regulations could commit serious mistakes with their clients’ money and incur fees, fines, and penalties.
Be humble. Having pride and being unwilling to admit mistakes can definitely endanger your business. In case things do not go as planned, talk to a colleague or another person you admire. Try to trust their judgment and resolve the situation.
In the advent of social media, financial advisors can market their services to a bigger population. But, advisors must ensure they are the only ones who can post to social media under their names. They can tap social media experts, but they can accidentally log into the wrong account, which can lead to substantial problems. As much as possible, be careful of what you post. Double check, if necessary. Remember, your social media account speaks for you and your business.
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