Recently, insurance regulators have been increasingly focused on and concerned about producer advertising that does not paint a complete and accurate picture of the services advisors can provide.
One specific example is what regulators deem “pretextual sales.” In the view of the regulators, advisors who offer services such as estate planning, tax planning, etc., need to either have the appropriate qualifications to provide such services to their clients or align with individuals who have those qualifications.
Put simply, if the advisor advertises a litany of services and all avenues ultimately lead to the sale of a product, the advisor runs the risk of regulatory scrutiny. Regulators are increasingly viewing this as deceptive and outside the scope of permitted activities for advisors.
While this increased focus may cause concern, there are steps that can be taken that can alleviate some of the risk involved. For example, an advisor who offers estate planning should strongly consider aligning with an estate planning attorney who can provide those services to the client in conjunction with the financial services offered by the advisor. Aligning your business with an attorney minimizes the risk of pretextual sales and also reduces the risk of performing the unauthorized practice of law actions which are closely watched and often reported by practicing attorneys in states.
While tax advice is a grayer area than the unauthorized practice of law, the same principles should apply to reduce liability upon the advisors. Aligning yourself with a tax professional to assist your clients provides a greater shield from liability for any perceived incorrect advice.
The focus of regulators now appears to be largely on advisors’ websites. Regulators are looking to ensure that the websites are not misleading in terms of what the producer is purporting to provide. Due to that fact, it is vital to identify any affiliation with qualified professionals up front. For example, an advisor who partners with an attorney at seminars to provide estate planning, or who refers his or her clients to the attorney for estate planning, needs to identify that attorney clearly on the website and disclose the nature of their affiliation. The same is true for tax professionals.
Transparency is key as regulators begin to more narrowly focus their efforts on advisors’ advertising practices with respect to the services they provide. Partnering with professionals in other areas and clearly disclosing those affiliations helps to minimize risk and keep your business safe.