Claim Scenario: The client and the advisor met to discuss their current financial plan. Based on the client’s investment needs and objectives, the advisor replaced an annuity with another annuity. The client later alleged that the advisor sold them an annuity that he did not need or want. Although the advisor adamantly denied these allegations, he failed to have any record of their conversation or contemporaneous file notes that outlined what was discussed with the client. As a result, the claim was resolved by surrendering the annuity and waiving any surrender charges.
Estimated Claim Cost: $15,000
Loss Prevention Tip:
Be consistent in documenting your files. Maintain a communication log of any
conversations with the client. These should be contemporaneous notes that are
written at the time of the conversation (or shortly thereafter, but on the same
day). Also, it is important to confirm in writing what was discussed at a
meeting, the client’s understanding and agreement with a particular financial
plan and/or decision with respect to any action/service you intend to provide.
By doing this, you will be able to establish that it is your custom and
practice to record your conversations and this will increase your credibility
if there is a dispute as to what was said.
Warning: A lot of the time there is a misunderstanding
between what the advisor explains to the client and what the client
heard/understood. By having a well documented communication log and a
confirming letter to the client, the advisor can possible avoid an E&O
claim. However, never manufacture documentation after a claim is made. If you
get caught, the consequences are often much worse than having no documentation
at all.
All information provided in this blog is for informational
purposes only. The sources used are presumed accurate. CalSurance Associates,
Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc.
will not be liable for any errors, omissions, losses, injuries or damages
arising from its display or use and will not assume responsibility for any
misguided information. No guarantees are implied.
