For many insurance and financial advisors, misrepresentation has become just another sales technique. For financial institutions, it’s become an accepted cost of doing business. For consumers, it’s become something bad advisors do—and have always done.
Here are a couple cases in point:
According to On Wall Street, Donna Jessee Tucker, a Virginia-based broker, “allegedly . . . engaged in unauthorized trading and other financial transactions, and that she misrepresented her actions to customers by forging documents and lying to them.” Authorities claimed Tucker stole $730,000 from elderly clients, using the money for vacations, a country-club membership, three vehicles, and other personal expenses. She also allegedly hid her tracks by sending false account statements via e-mail, which she believed her elderly clients wouldn’t read. In one case, she is accused of misappropriating $347,000 from a blind couple by forging their checks and cashing them at a credit union. Then she concealed her activities by issuing fabricated documents.
In Scotrun, Pennsylvania, a financial advisor generated more than $2 million in commissions by selling unsuitable investments and by fabricating client records. According to Financial Advisor, authorities charged Anthony Diaz with selling 80 clients variable life policies with large surrender fees even though they were near retirement. He also lied to insurance companies about his clients’ incomes and assets in order to qualify them for higher amounts of insurance. Making matters worse, Diaz also misrepresented an investment by telling clients it paid a guaranteed income of 9.1 percent and a 100 percent return of principal within five years. The investment did not guarantee either of those features.
Given such advisor conduct, is it any wonder misrepresentation has been the top controversy driving FINRA arbitration cases over the last four years. What’s more, it commonly sparks a major percentage of errors-and-omissions claims. In one prominent group of financial advisors, it was implicated in 25 percent of all claims, according to the program’s sponsor and insurer.
How do you feel about this? Hopefully, you are as outraged as we are at the National Ethics Association and also believe the time for blasé acceptance of misrepresentation is past. Advisors and product manufacturers can no longer afford to view deceptive sales practices as “the new normal”—or would that be “the old normal?” They must do what’s needed to root out this damaging behavior and rebuild how the public—and regulators—view our industry. Why is this especially important now? For four crucial reasons:
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