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News & Articles

 

A Real Life Case Study

 

Back in the fall of 2012, Bob and Sally Smith (not real names) bought three annuities from me. They chose the companies and the amounts they wanted to invest. Bob was turning 70½ in summer 2013 and wanted to start a guaranteed lifetime income stream he couldn’t outlive. The right solution was a fixed indexed annuity with a lifetime income rider. The annuity they chose gave them a 10% bonus and 10% growth for a year and then they would start the income for life.

But they got cold feet, buyer’s remorse, or something. A financial adviser friend warned them to get out of these annuities as quick as possible. He told them having all your money tied up in annuities is unsuitable. He coached them to complain to the WA State Office of the Insurance Commissioner (WA OIC).

I worked behind the scenes to ensure they did get ALL their money back.  Even though it was past the “free look” period (when anyone can return the annuity and undo the deal), I worked with the 3 companies to get this couple back all their money. I also paid these companies back all the earned commission. One of the companies cut me off from ever doing business with them again. Sad but true… it was the same company my mother-in-law used to create her lifetime income stream.

During the WA OIC investigation, it was discovered I had used the phrase “financial adviser” on my LinkedIn account. It didn’t matter that someone else set up that account for me and picked that phrase for me. Nor did it matter that I never sent anyone to that LinkedIn account. It didn’t matter that I never used the phrase “financial adviser” with this client (or any client for that matter).

I discovered the WA OIC has a regulation [WAC 284-23-360(3)] that says:

“Terms such as financial planner, investment adviser, financial consultant, or financial counselor must not be used by an insurance producer unless the insurance producer is engaged in an advisory business and receives a substantial part of their compensation from that source unrelated to the sale of insurance.”

Here’s a warning to you – Mind you, I did do my research.  These four sample phrases all require special training, certification, and credentials. However, the phrase “financial adviser” (at least back in 2012) did not.

By standard practice, a financial adviser (or advisor) is defined as a professional who renders financial services to clients. According to the U.S. Financial Industry Regulatory Authority (FINRA):

“… terms such as financial adviser and financial planner are general terms or job titles used by investment professionals. FINRA describes the main groups of investment professionals who may use the term financial adviser to be: brokers, investment advisers, accountants, lawyers, insurance agents and financial planners.” (Emphasis added)

https://en.wikipedia.org/wiki/Financial_adviser sourced on 10/14/2016

 

So it doesn’t matter that the phrase “financial adviser” is a job title and not a certification like the other four terms in the regulation. You WILL be fined if you use that phrase in any print or online reference or call yourself a financial adviser in a client meeting.

In its investigation, WA OIC found that I had done nothing wrong with Bob and Sally Smith. But they did find fault in my inadvertent use of the phrase “financial adviser” on the LinkedIn account.

This was such a hard lesson. But I did learn from it. I had to pay a $500 fine and public records documents stay online for up to 10 years (or so I’m told).  Sheesh, even a major bankruptcy goes away in seven years.  The WA OIC is not fooling around when they hand out these fines even for relatively minor offenses.  Be warned!

You might think that $500 or even $5,000 is a big fine.  But in the world of financial services these are tiny fines.  However, the real cost is the potential loss of client or prospect confidence and in turn lost business income.

So the fine is not the big deal.  The really BIG deal is having these WA OIC documents floating around the internet messing up your life for ten years!

Please, please, don’t make the same mistake I did! It’s not worth the hassle.

One of the documents that you might or might not find online makes it sound like there is still an ongoing and active case with the WA OIC (Office of Insurance Commissioner).  It says:

[PDF] Notice of Request for Hearing for Imposition of Fines, and references case number 13-0110

But actually this whole issue was settled way back (several years ago). I do not have an ongoing issue with WA OIC.

There is another important document regarding case number 13-0110 But this other document shows that the Notice of Request for Hearing for Imposition of Fines case number 13-0110 was terminated.  It actually spells out the settlement of the issue and a very deep reduction in the fine.  But this second document never seems to come up on a search for “Steve Minnich”.  Weird… I really wonder, “Why?”  Only this “[PDF] Notice of Request for Hearing for Imposition of Fines” document keeps showing up.

Again, please remember that these clients got ALL their money back.  They didn’t lose a dime.  We made sure of that.  But I did listen to my coach and made mistakes that I never, ever want to repeat again.

With nothing to hide, I give you the document that concludes the document you might have found online.  Here it is: “13-0108 and 13-0110 Order Terminating Proceedings” and this is the actual document that should come up when you do a search on “Steve Minnich” instead of the “[PDF] Notice of Request for Hearing for Imposition of Fines” thing that keeps coming up instead.

But I digress… now, back to this issue of using “financial advisor” on LinkedIn.  This issue was settled several years ago on May 15, 2013:

Although no evidence was found that this producer had referred to himself as a “financial adviser” with clients and that no client was harmed in any way by the use of this job title, it was determined that he should pay a fine of $500 for the use of this phrase on a LinkedIn online account which was never referenced or used in direct marketing to any potential clients.

Finally, I was advised by an attorney:

Based on your research and the fact that no client was financially harmed, you could probably win this case in court (or at least get the charges reduced to a warning) but it will likely cost you 20 to 30 times the $500 fine to achieve that result.

So my counsel recommended signing the Consent Order and paying the $500 fine. I followed his advice but, looking back, I should have paid the $10,000 to $15,000 to keep my name and reputation completely clean.

So this was advice that sounded right but turned out later to be a big mistake!

Conclusion and Regrets:

There is no way to foretell unintended consequences. Goodwill with clients and prospects has been lost. This indirect cost alone could be estimated at perhaps hundreds of thousands of dollars over time from potential new clients or referrals from old clients.

I strongly urge you to heed my warning. Don’t mess with the WA OIC. They mean business.

As you can no doubt gather from this open confession, I have certainly learned my lesson the HARD WAY.  So I am now ultra conservative in what I share with clients. I also now have all my clients sign a “Source of Funds – Important Disclosure” document declaring that I’m not an Investment Adviser Representative and cannot give securities related financial advice.

Thanks for letting me share this with you and I sincerely hope this will save you from the problems I have experienced.

Steve Minnich