Usually, the first substantive step in the sale process is the opening interview. The principal function of the opening interview is to continue to develop the rapport created in the approach step. The opening interview is typically followed by the fact-finding interview. As was mentioned in an earlier Module, insurance agents have a fiduciary responsibility to the insurers they represent (we'll explore fiduciary responsibility in greater detail later in the course). The ethical principles governing full disclosure require that the prospective client be fully apprised of the agent's status as an advocate for a financial product or products.

To be ethical, agents must share identifying information with the client. This includes the agent's status as a stock broker, a property and casualty or life insurance agent. If the agent represents a particular company, the status as a representative of that company needs to be disclosed, as well as any other relevant business arrangements. For example, if the salesperson is a registered representative he or she should identify the company and broker/dealer and provide home office addresses and telephone numbers.

Unless the agent is an RIA the agent should not represent him- or herself as a financial planner, investment planner, consultant or adviser. It is ethically responsible to describe what you do and the results you seek as long as you also state that the results are accomplished through the purchase of stocks, bonds, mutual funds, life insurance, annuities, or whatever other product you sell to achieve the desired results.

Often the prospect needs to be disturbed about his or her present situation before taking any steps to improve it. There is a fine line, though, between rousing a client's interest and scaring them. Any effort to outline risks (premature death, outliving one income, etc.) should be balanced and represent realistic scenarios. In order to disturb the prospective client, the opening interview will sometimes include graphics; typically, these graphics will depict marginal income tax brackets through the years or some other relevant statistics. When using these graphics, it's important to make sure that they do not mislead the prospect when presented without accompanying descriptive text and that the material match the prospective client's level of understanding. In addition to graphics, agents also use testimonial letters from satisfied clients. If you choose to use testimonials or endorsements, they must be genuine and reflect the endorser's current opinion, and any financial interest held by the endorser -- for example, that it is a paid endorsement -- must be disclosed.

Sometimes a fact-finding interview is scheduled as a separate meeting; but just as often, it flows as a natural extension from the opening interview. The object of the fact-finding interview is to gather sufficient information to analyze the client's needs and support a recommendation that is suitable to the client's situation -- consistent with his or her objectives and tolerance for risk.

Usually, the fact-finding step of the sales process presents few specific ethical issues that have not already been considered. The agent has an ethical and legal duty to make a diligent effort to determine all of the client's circumstances that are relevant to his financial situation. For the financial services agent seeking to make a suitable recommendation, these circumstances include the prospect's current finances as well as his or her hopes and dreams.

Whenever interacting with the prospect, care must be taken to ensure that your questions don't inadvertently lead the prospect to believe that you are in the business of providing services not actually provided. For example, a life insurance agent's questions regarding the prospect's investment portfolio could cause the prospect to conclude that the agent is in the business of providing investment advice apart from his business of selling financial products. Unless the agent was an RIA, such a conclusion would be incorrect.

Similarly, the tools that the agent uses could lead the prospect to erroneous conclusions. For example, suppose the data-gathering form shown to the prospect is titled Financial Planning Form. A similar conclusion -- that the agent is in the business of providing financial advice for a fee -- could be drawn by the prospect. As a financial agent, you have the responsibility to avoid anything that could reasonably be expected to mislead the prospect. Additionally, you have the ethical responsibility to correct any misperception of which you become aware.

Florida regulations require testimonials and endorsement by third parties to "be genuine, represent the current opinion of the author, be applicable to the policy advertised and be accurately reproduced" Is the person endorsing the insurance product is considered a "spokesperson"", the spokesman most likely must be licensed as an insurance agent. A spokesperson is anyone who has a financial interest in the insurer, is in a policy-making position or is in any way directly or indirectly compensated for making a testimonial or endorsement. The financial interest of the spokesperson, or his or her capacity as a representative of the insurer must be disclosed. If the spokesperson is compensated for the testimonial or endorsement the phrase "Paid Endorsement" must also be included. When a testimonial refers to benefits received under a policy for a specific claim, the specific claim data, including claim number, date of loss, and other pertinent information shall be retained by the insurer for inspection for a period of four years. For the full text of Florida Administrative Code 69B-150.008

Federal law requires financial institutions, including insurance companies, banks, brokerage firms, etc., to safeguard the privacy of client financial information. The Financial Modernization Act of 2002, also known as the Gramm-Leach-Blily Act, limits the ability of financial institutions to share non-public financial information. This federal law requires state regulatory authorities to enforce restrictions on the use of client information -- Florida's Department of Financial Services complies with this federal mandate. In general, the rules require insurers to notify policyholders and other customers of their privacy rights (what type of information is collected and disclosed, the types of affiliates and other third parties with who information might be shared, etc.) when the relationship is established, and an annual notification thereafter. Customers must be given the opportunity to "opt-out" of information sharing for marketing and other purposes not related to the execution of the contract. Non-public information may be disclosed to the extent it is necessary to implement the contract. This rule also extends the policyholder's privacy rights to health information collected by the insurer. Agents should be aware that information collected during the fact-finding interview is "privileged" and of the consequences of unauthorized disclosure of financial and medical information.

(1) Testimonials and endorsements used in advertisements must be genuine, represent the current opinion of the author, be applicable to the policy advertised and be accurately reproduced. The insurer, in using a testimonial or endorsement, makes as its own all of the statements contained therein, and the advertisement, including such statement is subject to all the provisions of these rules. When a testimonial or endorsement is used more than one year after it was originally given, a confirmation must be obtained.

(3) Any person acting as a spokesperson, as defined in the preceding paragraph, who performs any of the following acts in an advertisement shall be considered soliciting an insurance product, and such person shall be a licensed insurance agent pursuant to the Florida Insurance Code:

(4) The fact of a financial interest or the proprietary or representative capacity of a spokesperson shall be disclosed in an advertisement and shall be accomplished in the introductory portion of the testimonial or endorsement in the same form and with equal prominence thereto. If a spokesperson is directly or indirectly compensated for making a testimonial, endorsement or appraisal, such fact shall be disclosed by use of the phrase "Paid Endorsement" or words of similar import in a type style and size that is at least equal to that used for the spokesperson's name or the body of the testimonial or endorsement, whichever is larger. In the case of television or radio advertising, the required disclosure must be accomplished in the introductory portion of the advertisement and must be given prominence, and if printed must be presented in a type style and size that is at least equal to the largest type otherwise used in the advertisement. The use of the phrase "Paid Endorsement" is not required where the spokesperson is a company officer who is paid generally but not specifically for making the advertisement.

(5) The disclosure requirements of this rule shall not apply where the sole financial interest or compensation of a spokesperson, for all testimonials or endorsements made on behalf of the insurer, consists of the payment of union "scale" wages required by union rules, and if the payment is actually for such "scale" for TV or radio performances.

(6) An advertisement shall not state or imply that an insurer or a policy has been approved or endorsed by any individual, group of individuals, society, association, or other organization, governmental agency or other entity, unless such is the fact, and unless any proprietary relationship between an organization and the insurer is disclosed. If the entity making the endorsement or testimonial has been formed by the insurer or is owned or controlled by the insurer or the person or persons who own or control the insurer, such fact shall be disclosed in the advertisement. If the insurer or an officer of the insurer formed or controls the association, or holds any policy-making position in the association, that fact must be disclosed.

(7) When a testimonial refers to benefits received under a policy for a specific claim, the specific claim data, including claim number, date of loss, and other pertinent information shall be retained by the insurer for inspection for a period of four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time. The use of testimonials which do not correctly reflect the present practices of the insurer or which are not applicable to the policy or benefits being advertised is not permissible.