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“What happens in Vegas stays in Vegas.” Wasn’t that a great saying! Today it has been amended to: “What happens in Vegas stays on Facebook forever.” Technology has raised the stakes for doing anything stupid. If you are a financial professional, you cannot bend the rules because a single action can compromise your career and your life.
The importance of your signature. There are many times in your personal and business life you are required to sign your name. We often do it without thinking. Sometimes we might be tempted to “fudge the numbers” or be economical with the truth. I had this experience at the post office when filling out a customs form for the package I was sending overseas. I asked the guy behind the counter, “Can I say (this) instead of (that) when filling out this form. He explained “When you sign your name, you are attesting everything above your signature is true.”
You cannot sign a client’s name or let them sign someone else’s name. If the client has a Power of Attorney, this is an exception. Assuming they do not, this is an example of “What happens in Vegas stays on Facebook forever.” That forged signature is stored away forever. If a legal dispute ever occurred afterwards, the client could say: “That is not my signature on that document.” They would make the case they are not liable.
You cannot take instruction for another person without a Power of Attorney. This is a variation of the problem mentioned above. With IRA accounts, a key word is Individual. Upon liking your stock idea, your client cannot say: “But it in my spouse’s IRA too.” You need to hear their voice on the phone before you can place that order.
Be careful what you put in print. Most communication is done via e-mail, but paper notes or actual letters might still be used. When I was an advisor the Compliance officer told the story about the advisor who sent an options trading form to a client requiring background information. They attached a note saying: “Put down anything. Use creative accounting.” I am guessing the client must have saved that note, producing it during a lawsuit.
Do not do anything you would not want to appear on the front page of the Wall Street Journal. This is a reality check given by my first manager. He also said something similar with “You would not want to tell your mother about” or “You would not do in your mother’s account.” It can be easy to get into a complex situation, making decision after decision you know are in the grey zone, then suddenly discovering you have done something seriously bad. It is important to take a step back, looking at situations as third party would see them.
Have a problem, get a partner. What sort of problems might be getting you into the grey zone. You know when something does not feel right. If you find yourself in this situation, sit down with your Compliance officer before a small problem becomes a big problem that gets out of control. They might have seen this problem before and have a procedure to follow.
Document everything. Client Relationship Management (CRM) systems make this easy. If a dispute with a client develops, it might rely on conversations held months or years ago. You need a record of when you spoke and what you discussed. I know when our financial advisor calls to schedule a periodic portfolio review and I decline, there is a notation somewhere indicating they reached out and made the offer.
Assume conversations are recorded. Your firm might record calls “for training purposes.” You might have a conversation with a friend who is also a client. This might take place at home. Always be cautious in your choice of words when discussing business.
Unfortunately, the public enjoys reading stories about financial advisors caught doing something illegal. This means the majority of honest advisors are “tarred with the same brush.” This means the public assumes these misdeeds are widespread. You need to be prepared for the unlikely event something might go wrong.
Related: Cash Is Not Dead. 12 Reasons Why Clients Still Need It