Banker in Distress
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What Happens if You Make Mistakes, Say The Wrong Things to Clients?

Financial advisory business is a highly regulated industry.  In Investment Banking and Private Equity, the practitioners would have to read through tons of legal documents and learning for months and years.  They do behind-the-scene execution before the best is granted the opportunity to deal with clients.

After all, they are dealing with hundred of millions and billions of investment and capital decisions for Fortune 500 Companies, global MNCs or a family office that manages billions of assets?

This is not the case for Wealth Managers.  Upon receiving their advisory license, they are thrown straightaway into meeting clients and providing financial advisory.



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It is little wonder many advisors make mistakes or say the wrong things to clients.  But, if you are the financial advisor, what do you do when you make mistakes and say the wrong things?

 

No. 1 Luckily, You Are Not The First

Private Banking Management Associate
Private Banking Management Associate

” Life Insurance is designed to payout upon your death “

” Life Insurance is designed to payout upon your death ”  Unfortunately, it is not as simple as it sounds.

There is the court order, the will, grant of probate, delays due to fraud, application errors, mistakes in underwriting.  Some insurance companies give the payout faster than others.

” Unit Trust.  The only fee is the sales charge ”  And one day, you uncover there’s management fees and trailer fees, which your financial institution get some as well.  These fees could reduce the illustrated returns considerably.

” Interest rate goes up, bond prices fall ”  You assume when interest rate starts dropping, bond prices should go up.  And it didn’t happen as .. then many factors kick in. How do you explain to your clients?

Sometimes, it could be

  • administrative mistakes or wrong signature
  • quoting the wrong dollar value at maturity
  • forgetting to tell clients mortality charges will rise according to age.
  • Principal protection or guarantee is subject to the solvency of the issuing organization
  • citizenship impacts financial ownerships and rights

Your Saving Grace: If you are a new advisor, learning from the mistakes early is great.  It quickly teaches you to be vigilant, especially when the mistakes result in a cancellation of sales.  Rather than hiding the mistakes, you could be honest about it … and probably laugh it off a few years later.  Why would a lost opportunity cause you more and better sales in the future?

When you become a team manager someday, you would be able to guide your new advisors better too.

 

No. 2 It Won’t Be Your Last

Banker in Deep Thought
Banker in Deep Thought

If you think you can learn from it, great.  But chances are, you will still make mistakes.  Financial advisory involves handling complex financial processes, administration works and ever-changing terms and regulations.  This means you are constantly reacting to advisory process and administrative work.  You will continually be prone to mistakes.  So double-checking, triple-checking, having another person to help out, pre-empting errors would save everyone’s time, including clients and your own time.

Your Saving Grace: When clients see your prudent effort in checking the documents and ensuring every sales advisory is well-covered, they will be so over-whelmed by your diligence,and literally trust that you will manage their money well.

 

No. 3 Complaints and Displeasures

Personal Banker
Personal Banker

If you think by saying: “It’s an honest mistake” and the issue will dissipate, you likely will be wrong.  Perhaps, you had been taught that is the right thing to do when you make a mistake, which you then help to resolve the issues, and make yourself feel better.

Welcome to sales in the financial sector.  When it comes to money matters, you get hit harder and uglier by clients.  Double the responsibilities and consequences of being in a highly regulated industry and your very-demanding superiors who are trying to get you to adhere to every processes.  And you get serious warnings such as losing your license and going to jail … …

Your Saving Grace: Financial advisory is about managing risks and an uncertain future.  There will be good times and there will be recessions.  Learning how to deal with more uncertainties early in your career will give you the necessary tenacity, character and skill-sets to deal with tougher and challenging times.

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No. 4 You May Get a Warning

Depressing Times
Depressing Times

Would you get a warning?  It depends on the seriousness.  Some mistakes warrant a warning, as required by regulations or internal policies.

For example, when communicating with clients, some new advisors think Unit Trust Bond Funds is very much guaranteed (very safe) or Unit Trust Balanced Fund is diversified and thus will only go up.

Isn’t that how performance are being illustrated Unit Trust Investments? It seems to go only up.

More Judgement Errors:

Your Saving Grace: Most of the time, your superiors and departmental heads are quite kind to help you get through the tough times.  You may get a big tongue-lashing – that is part of the learning experience, to deal with mistakes and manage risks.  If they fire you on your early mistakes, it’s probably not such a good place to be in.  Perhaps they warrant firing you on serious breaches, which could jeopardise the reputation and future risks of the institution and industry.

 

No. 5 Suspension, Fired, Blacklisted and Jailed

Top Banker Out of Job
Top Banker Out of Job

As lucrative as it seems to be in the financial industry, things do go wrong.  If you are not astute enough or you commit a serious breach of regulations, you may be suspended from your practice, fired, blacklisted and jailed.  You will be subject to civil and criminal lawsuits.

Examples:

Financial Institutions have a tough time balancing between taking care and taking risks.  This could involve suspension of assets in the bank.

Your Saving Grace: The odds are low, but it still happens for the unfortunate few.  Some get into it due to fraud, ignorance or arrogance.

 

No. 6 Sometimes, it is a Hoax.

Independent Financial Advisory
Independent Financial Advisory

Ever heard of mystery shoppers, sabotage or reality show?  Yes, they are around and they are here to catch you off-guard.  Since it is likely a test or hoax, you should get away with it.

Your Saving Grace: Your financial institution might get a tick-off, reminder, light penalties if you flung the test.  But this is all about improvements for everyone.

 

No. 7 Everyone Makes Mistakes

Successful Private Banker
Successful Private Banker

Everyone makes mistakes.  Sometimes you are forgiven, sometimes you are not forgiven.  Sometimes you get away with it, sometimes you don’t.

As a Wealth Manager or Financial Advisor, clients entrust their life earnings and assets to you.  Naturally, they expect you to be careful when you manage their money.

Your Saving Grace: Over time, you become a better advisor.  Like aged wine and whiskeys, an advisor develops over time.

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