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How bad leads can crash good reputations.

Reputation is as delicate as a butterfly's wings. It follows that a small event distantly related to your business can have a huge impact on your reputation. You may recognize this as the "butterfly effect"--named after the theoretical possibility that a butterfly flapping its wings in Belize can generate a tornado in Texas.

Advisors are always launching their own butterfly effects. They make decisions about what products to sell, which FMOs or broker-dealers to affiliate with, what selling systems to use, etc. According to chaos theory, which underlies the butterfly effect, one such decision can produce potentially devastating consequences. Here are events relating to advisors hiring lead-generation firms, each with unforeseen negative effects on their reputation:

Case #1: A direct-mail firm suggests the end is near for Social Security in a business-reply card mailer to the senior market. Butterfly effect: The consumer is actually a retired professor of healthcare finance. He knows the postcard is fraudulent but agrees to an appointment to confront the advisor. He does more than that; he reports the person to the state insurance department, which issues sanctions. The action gets posted to the department's website, picked up by local media and sent aloft by Google, forever.

Case #2. A vendor telemarkets to non-English speakers. Consumers say "yes" just to get the telemarketer off the phone. Butterfly effect: The agent arrives at the appointment to find an elderly non-English speaking Hispanic woman who has early-stage dementia. The woman becomes anxious about the unknown visitor, calls her son, who summons the police. The police arrive to investigate and the agent's name gets mentioned at the station, triggering a damaging rumor in his close-knit community.

Here's my point. Butterfly wings are fragile, but they can also unleash tornadoes. Similarly, the people you decide to partner with can easily destroy your reputation if you let them. How to prevent this?

1. Affiliate only with partners who share your ethical values. Your reputation is only as good as the reputation of everyone you work with.

2. Do your due diligence before you decide who to partner with. Never take verbal promises on faith.

3. Use the power of the Internet to check out potential partners--before you do business.

In short, be protective of your fragile business reputation. Yes, with the right products and sales skills, it's not hard to fly high. But one flap of a butterfly's wings can bring you down fast.

Steven McCarty, National Ethics Bureau

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Title Annotation:Ethics in Action
Author:McCarty, Steven
Publication:Senior Market Advisor
Date:Apr 27, 2011
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