The Approach

Leadership is a common characteristic of successful sales professionals, regardless of their field.  Those leadership qualities of competence, credibility and vision are normally what make him or her successful.  The financial services practitioner, because of the more personal nature of his or her business, must possess these qualities in even larger amounts.  Whether the salesperson is an agent, stockbroker or other financial services practitioner, he or she must be viewed as both competent and credible before the prospective client will share financial information.  Because of that need to appear competent and credible, there is enormous pressure on the agent to be knowledgeable and experienced.  

For the great majority of financial services practitioners, this need causes them to obtain professional education and experience.  When that occurs, the practitioner and his or her client are benefited.  However, if the need to appear competent causes the practitioner to present him- or herself as having credentials, experience or skills that are not possessed, it becomes a serious problem.  

The purpose of the approach step of the sales process is to cause the prospective client to come to the understanding that the practitioner is someone with whom he or she may want to do business as a result of the rapport that has been created.  Although any practitioner may have a preferred setting, the approach may be accomplished in any number of environments.  It may be done at a seminar, during a telephone call or at a preliminary meeting.  The ethical requirement in the approach step is that the information imparted to the prospect be balanced and complete.  

Because this sales process step is designed to allow the practitioner to present him- or herself to the prospective client, the issues that are generally the most ethically sensitive have to do with how the practitioner represents him- or herself and what is discussed.  If the initial approach is made by telephone, as is normally the case, the practitioner should usually avoid discussion of specific products since adequate explanation in the relatively short space of time on the telephone is difficult.  An attempt to discuss a complex financial product in this setting often results in misunderstandings.  Unless the prospect is highly knowledgeable with respect to the product, a complete explanation is more likely to cause confusion rather than understanding.

However, it is not the practitioner's attempt to discuss a financial product over the telephone that is the principal ethical concern.  Potentially the most serious ethical issue in the approach step has to do with the practitioner's stating or implying that he or she has skills, experience or credentials that are not possessed.  

An example of that kind of misleading statement is the declaration that the practitioner is a financial planner or financial adviser when, in fact, the practitioner is a life insurance agent or registered representative.  Such a statement could suggest to the prospective client that the practitioner was in the business of providing unbiased analyses of client financial situations while having no inherent conflict of interest.  Of course, the practitioner's selling of financial products clearly creates such a conflict and makes that kind of statement misleading and a breach of ethics.  

If the practitioner was a registered investment adviser (RIA), use of those titles would be appropriate since the RIA that sells financial products is required to disclose to the prospective client in a client brochure that a conflict of interest exists in his or her offering financial products for sale.  Without that statement concerning the conflict of interest, however, appropriating these titles is misleading and presents ethical problems; furthermore, their use in that situation would be illegal in certain jurisdictions.  

The manner in which the practitioner holds him- or herself out to the prospective client could also impact the client's reasonable expectations and the practitioner's liability.  The reason for that heightened liability may be obvious; if the practitioner represents or implies that he or she has certain skills, the client may have every right to expect the practitioner to provide service at a level that one possessing those skills could be expected to provide.  Failure to provide that expected level of service could make the practitioner liable for damages the client sustains as a result.  Certainly any implication by the practitioner that he or she is affiliated with the government or any governmental agency in an attempt to suggest governmental approval of the practitioner or products is unethical.  

Some practitioners may choose to use a trade name.  While using a trade name is certainly acceptable, its use by the practitioner as a way of identifying him- or herself without also identifying the company being represented would be misleading.  To the extent that it misleads, it is unethical.  Consider, for example, the life insurance agent who identifies himself as a member of the "First Houston Group" in order to disguise his affiliation with a life insurance company.  There should be no question about the ethical value of that deception.  The agent is clearly attempting to mislead his prospective client, an obviously unethical act.

Discussion in the approach step of the products being offered presents another area that could create ethical concerns.  As in the other areas we've discussed, the ethical requirement is for full and fair disclosure.  Any product discussion should have as its objective a complete understanding by the listener.  Here are some practical examples of the meaning of full and fair disclosure:

If the practitioner states or implies that the products offered involve tax advantages, it should also be stated that only a thorough review of the client's situation would determine if those advantages apply to him.

The real nature of the product should not be obscured through the use of unfamiliar names.  Any product should be identified by its common name.  As an example, the use of the terms "plan" or "private pension" when referring to a life insurance policy could be unethical since those terms would tend to obscure the true life insurance nature of the product.

Using highly technical information about the products being offered that could be expected to mislead the person(s) receiving the information is unethical even if the information is true in every regard.

Even providing the prospect with a prospectus -- without a discussion of the various costs of the product with the prospect -- could be unethical if the practitioner believed the prospectus would not be read.  A failure to discuss costs would be less than full and fair disclosure.