It is tough to watch the evening news and see someone you know, or someone whose products you have earnestly recommended, being led away in handcuffs.
It seems that hardly a day goes by without a financial scandal hitting the papers and prime-time newscasts. Such scenes can incite the paranoia in each of us.
Although most of us try hard each day to do the right thing, even the best-intentioned can occasionally stumble. And when this happens, it can be difficult to recover.
Obviously, the best thing to do is always put your client's best interest first, behave in a forthright manner, use the most efficient products and services available, avoid putting your client in anything he or she does not fully understand, and maintain regular contact to ensure you remain true to your client's objectives.
But sometimes, following all those rules isn't enough.
We live in an age when dissatisfied investors are tempted to pursue legal means, thanks to the heavy potential rewards. Meanwhile, professional reputations can be scorched instantly due to the power of the web.
How does an adviser maintain his or her good name in an age of scandal and a climate of aggressive litigation, when the power of mass communication is available to anyone with an Internet connection?
Consider what happened in my home one afternoon. My wife received an e-mail from a friend about rude treatment that she had received from a local gas station attendant.
But this woman didn't just contact my wife. She e-mailed every member of the local mom's club — about 400 mothers. Most likely, many told their husbands about it, doubling the reach of the e-mail by dinnertime.
A few probably forwarded it along to other members of the community as well. It is safe to say that by the end of the day, probably 1,000 people in our small town had heard about the so-called rude attendant.
Did we even know whether the story was true? For better or worse, we instinctively trusted the originator of the e-mail. What about the attendant's side? Was he provoked?
Maybe he wasn't feeling well. Had anyone confirmed that a confrontation actually took place?
Unfortunately, the answers to those questions hardly matter. In the court of public opinion, there wasn't much the attendant could do once the customer hit the “send” button.
What matters is that within a few minutes, many customers had formed a negative impression about a local business — one that I have personally patronized many times, never having had a bad experience.
Google has become the preferred way to get information about a business or service. A friend's referral is just the beginning.
And what people unearth online is often shared via chat rooms and other postings. They often accept what they read as gospel.
Trust can take years to build and a relatively few moments to destroy.
So how does an adviser defend his or her reputation in the face of an angry client — whether that client's concerns are justified or not — who is armed with the power of the Internet? A good place to start is by being honest with yourself.
Consider the following questions about your practice:
• Do you use the best business model for your client base (i.e., fee or commission)?
• Do you sell the appropriate mutual fund share class?
• Which carrier do you choose: one that takes you golfing or the one with smaller fees?
• Have you kept clients in investments with questionable managers?
• Do your clients un-derstand the investments that you have selected?
• Have you done your due diligence?
• Is your marketing completely truthful?
• Do you disparage competitors, former partners or associates?
• Do you volunteer time for a worthy cause?
• Does your office have a meaningful code of ethics?
Each of these questions generates more reflection and should help you determine whom your actions affect and how you are perceived by your clients, your community and your fellow advisers.
Accidents happen. None of us gets it right all of the time.
But when we make a conscious effort to do the right thing on a regular basis, mistakes in conduct can be minimized. If nothing else, we can move forward with a clear conscience — quite possibly the greatest reward of all.
Joseph Finora is the author of “Media Relations and Creative Marketing Tips for Financial Professionals” (BookSurge Publishing, 2007).
