Reputation death, Pt. 3: Beware the black hat trickster

By Steven McCarty

The National Ethics Association


Have you ever hired someone to provide a service, only to discover he or she played you with lies or distortions? If so, you fell victim to a "black hat trickster." This happens to millions of consumers each year. When they find out they've been tricked, they post Facebook rants or complain on Internet sites such as RipoffReport.com. Result: "tricky" advisors can see their reputations vanish as quickly as magician David Copperfield dispatched the Statue of Liberty. Poof!

Black hat tricksters are the bane of today's marketplace. They wear black hats because they lack white hat empathy. They view people as objects to be taken advantage of rather than as flesh-and-blood humans with feelings and needs. And they're tricksters because they're willing to hoodwink clients to benefit themselves.

Black hat schemes range from major fraud to minor deception. Major black hat criminals like Bernie Madoff get a lot of publicity, but minor tricksters are much more common, hurting millions of consumers every year with stunts like these:
  • Misrepresentation of fact: falsely telling someone that a product will never decline in value

  • Churning: advising a client to switch out of a perfectly good product into an inferior one

  • Material omission: failing to disclose surrender periods and related fees, especially to elderly clients

  • Misrepresentation of purpose: telling prospects you want to discuss (living trusts, retirement planning, estate planning, etc.) when your goal is to simply sell them an annuity.

  • Lack of fair dealing: recommending low-value, high-priced coverage because it pays a higher commission.

  • Lack of suitability: recommending a product with a long surrender penalty to a client with liquidity needs.
Now black hat tricks aren't confined to the above items. They occur any time an advisor uses his knowledge of the system to take unfair advantage of a prospect. This makes the person no better than the average three-card monte artist on the street corner.

So how do you avoid killing your reputation through trickery? Here are a few points to ponder:
  • Use your knowledge for good, not evil. Work the system to benefit your client, not yourself. As a result, you will benefit tremendously over the long term.

  • View your clients as real people. Consider how playing tricks can hurt flesh-and-blood families. Better to play nicely.

  • Realize that it only takes one trick to kill your reputation. No short-term financial advantage can be worth risking irrevocable reputation death

  • Never assume that clients won't find out. If you do something tricky, the truth will always come out, and sooner than you think.
Finally, consider your conscience. If you do the wrong thing, your misdeed may weigh as heavily on you as Penn's truck appeared to weigh on Teller. And that's no illusion!