Don’t make these 5 horrible Financial Advisor mistakes

We all make mistakes. And that’s okay. This is how we grow in both our professional and personal lives. But, by identifying mistakes we’re making or even before we make them, we can change course and better ourselves.

As a Financial Advisor, you may have experienced some, if not all of these common mistakes first hand. Whether you’re just starting your career as a Financial Advisor or you’ve been in the industry for many years, get out of the habit of making these 5 unfortunate mistakes.

Mistake #1: Poorly utilizing your time

Time management is an important skill for any career. Many people get hung up on spending most of their work day completing reactive tasks, such as immediately responding to phone calls and emails. Yes, these tasks are important, but you need to be proactive, as well. You’re not just a Financial Advisor, you’re also a salesperson and you need to spend time growing your book of business.

Poor Time Management
Good time management is key to be a successful Financial Advisor.

Use time blocking to better manage your day-to-day tasks. Sure, you’ll need to dedicate a little of your time to plan out you days/week, but you’ll save yourself time in the long run by planning out dedicated time for your reactive and proactive tasks. Plan out your days using a calendar and include work-related appointments/meetings and reminders. Also, it’s a good habit to include personal activities, such as vacations, dinner dates, family time, etc. to use as incentive to complete your work.

You lose time when transitioning back to a task that you put on hold to respond to a new email. Instead, plan out a time in your day for returning emails and phone calls, so you can concentrate on getting your proactive tasks done.

Mistake #2: Giving 100% of your attention to 1 client

Financial Advisor Couple
Make sure both individuals get to speak when discussing finances.

When your client is a couple, giving all your attention to the individual engaging the most in conversation may seem beneficial. Since he or she is talking more, you may assume he or she is responsible for making all of the financial decisions.

However, what happens if that individual is no longer part of the decision making process? He or she may leave the relationship or unexpectedly pass away.

His or her partner may decide to cancel your services and search for a new Financial Advisor because he or she didn’t develop a relationship with you or may not have had his or her needs met.

Make sure to engage in conversation with all parties. Draw in the less vocal partner, even if you need to politely hush the other.

Mistake #3: Failing to be discreet, especially with couples

While reviewing shared finances, you may uncover expenses unknown to other family members.

Be cautious when discussing financial details within a shared budget. A member of the family may have spent money on something that doesn’t benefit the rest of the family.

The last thing you want is to cause an explosive dispute in your office space. The argument may even lead to the termination of your services.

Discreet Financial Advisor
Be discreet when discussing individual expenses with a family.

Mistake #4: Getting Fiduciary Insurance in place of an ERISA Bond

A common question we’re asked by Financial Advisors is if there’s a difference between an ERISA Bond and Fiduciary Liability Insurance.

The short answer is yes. Both policies serve different functions. 

An ERISA bond doesn’t cover your client as the plan administrator if they mishandle plan funds. Instead, the bond protects employees assigned to the employee benefit plan when the plan administrator mishandle the funds.

Need an ERISA Fidelity Bond?

If your client is seeking protection in case they fail to maintain their fiduciary responsibilities, they would need Fiduciary Liability Insurance. This type of insurance isn’t required, unlike the ERISA Bond which the U.S. Department of Labor does require.

Mistake #5: Moving forward without all the necessary paperwork

You may find yourself with a client who is a friend, family member or a referral from someone you trust. After a verbal agreement of employment, you start working on their finances. However, when you send them an invoice for the significant amount of time you’ve put into working for them, they decide they’re no longer wanting your services and refuse to pay your invoice. With no written contract, you’ll have a difficult time collecting payment for the invoice.

Financial Advisor Client Signature
Make sure your client signs all agreement paperwork before you begin working.

When you begin working with a client, always make sure to have an agreement of payment in writing before engaging in work. Being upfront about associated costs is important, you don’t want to work for free.

Time is money. And if you don’t have a signed contract with your client, they may skip out on paying for the work you’ve put in for them.

Conclusion: Don’t make these Financial Advisor mistakes

If you’re guilty of making 1 or more of the mistakes above, now is the time to take corrective action. Just remember to avoid these mistakes as you continue forward in your career as a Financial Advisor.

Prioritize your time: Block out specific time for both reactive and proactive tasks.

Engage with all parties: Don’t give all your attention to one party. You may lose your client if they separate or the individual making all the decisions passes away.

Discretion is important with family clients: You may discover financial details that one party may not wish to disclose with his or her family. Be mindful when discussing such expenses.

Understand ERISA Coverage: If your client is the plan administrator for their company’s employee benefits, The U.S. Department of Labor requires they secure an ERISA Bond with a minimum bond amount of $1,000 or 10% of the plan funds handled the previous year, whichever amount is more.

A common compliance issue with ERISA Bonds is not having the necessary amount of coverage. All ERISA Bonds under the amount of $500,000 include Inflation Guard when purchased through Surety Solutions, A Gallagher Company. So, your client will not have to worry about an increase in premium when plan funds increase mid-term or about being out of compliance with the U.S. Department of Labor.

Select a bond amount to get free ERISA Bond quotes.

The ERISA Bond protects the employees tied to the benefits plan, not your client. Your client could choose to get the optional Fiduciary Insurance to have coverage as the plan administrator.

If you have any questions about ERISA Bonds and would like to speak to a Surety Bond expert, give us a call at (866) 722-9239 or send an email to info@suretysolutions.com.

Get signed agreements from clients before beginning work: Don’t work for free. Only start working when you have a signed contract with your client. Enforcing payment of an invoice is difficult without signed documentation.

Have you made any of the mistakes above?

Is there a mistake we should have mentioned?

How would you advise recovering from these or any other Financial Advisor mistakes?

We would love to hear from you in the comments below.

Helpful Resources:

About Surety Solutions, A Gallagher Company

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Beau Chipman
Beau Chipman

Beau is the Marketing Content Developer at Surety Solutions, A Gallagher Company. He creates content about all types of surety bonds, including mortgage, court, lost title, contractor, fidelity, ERISA and many more.

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