An Antidote To Advisors-Gone-Wrong


Wouldn’t you know it? Just as I was reading about the inaugural National Financial Advisor Week that is getting underway this week in Times Square, along came some rain on the parade.

The event is designed to celebrate “the excellent work financial advisors do for investors.” A sunny hello to that.

But then there was the rain. It came through my computer in the form of a news release from the U.S. Attorney’s Office in Washington state. The document reported that the U.S. District Court in Seattle has sentenced a financial advisor to five years in prison and ordered him to pay more than $1 million to eight elderly victims. An example of “excellent work” it was not.

The advisor’s crime was mail fraud and Social Security number fraud. But industry practitioners might think of the crime in broader terms as well, such as besmirching the image of advisors. For insurance professionals, the news might be especially unnerving, since the advisor is described as the owner of a retirement consulting company which sold annuities and life insurance.

Here’s the boil-down of events based on the official record: Edward H. Kahler of Key Resources, Kenmore, Wash., had accessed and liquidated accounts of elderly customers by creating profiles via proprietary client information he had in his files. He also failed to make requested annuity purchases with money provided to him by certain customers.

This is hardly an indictment of the entire advisory profession. It’s a report on sentencing of one person who was found guilty of fraudulent acts.

Yet every time announcements like this come out, it darkens the image of the advisory profession and stirs up distrust among customers who are considering getting some financial advice. As U.S. District Judge Robert S. Lasnik was quoted as saying at sentencing, “…he took away trust, he took away money… and now people’s lives are affected in a terrible way.”

It doesn’t help that government investigators, officials and courts do not also release statements about how other advisors are meeting and exceeding their responsibilities to their customers. That is not the government’s mission, of course. Its mission is to protect the public from harm by fraudsters, the people who don’t do what they’re supposed to do. Still, the impact is that consumers rarely get a balanced view from officialdom of advice and advisors.

Since that is the case, advisors — hopefully supported by their providers — need to take on the role.

To my mind, that includes not only offering educational pieces about insurance and financial products and services on public websites and in materials delivered to customers, which is commonplace today. It also includes getting behind the financial literacy movement, so that consumers can become more conversant about industry terms, concepts, issues and, yes, advice.

Literacy can be a powerful antidote to bad news about advisors-gone-wrong, because informed consumers are likely to be better able to assess the bad news. They may view it in context, for instance. They will have mental markers to separate the wheat from the chaff. (“My advisor is wheat; that other advisor is chaff.”) They will have more confidence in voicing questions, doubts and satisfaction.

One more thing: Advisors know many things about what makes for an effective, trustworthy advisor as well as what advice is and is not. These are often things that consumers do not know. It wouldn’t hurt to take a few minutes during client meetings to pass on some of this knowledge in little chunks to the customer. Think of it as a value-added, or a type of literacy program for the individual customer.

About the above-mentioned National Financial Advisor Week. It’s an initiative of AdviceIQ, a New York financial data and information publisher. What is intriguing is that the week-long event is offering programming for investors as well as advisors. Here’s hoping that the paths between the two will cross, bringing mutual understanding and greater trust.



Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Connect with Linda →

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