Common Legal Issues Impacting Accountants, Insurance Agents and Financial Advisors

It’s easy for specialists to get lost in their area of focus. Your specialty can look like the entire world, especially once you have your own business and let yourself focus on the things that you really love.

However, this is a peril, because everyone, no matter their specialty, exists in a complex, legal environment. This legal environment can have profound impacts on your business or your life, especially if you neglect it. Accountants, insurance agents, and financial advisors are no exception to this risk. Here are some of the legal issues that you can more easily navigate with the help of a small business lawyer.

Accountants

Accountants are trusted with their clients’ money. There is nothing more dear to many Americans’ hearts than their money, and this means that these interactions can be fraught with tension and suspicion. Accountants have to take steps from the beginning to ensure that everything they do will hold up under legal scrutiny or else they can find themselves in serious legal trouble.

Accusations of Fraud or Negligence

One of the biggest potential legal dangers for an accountant is an accusation of fraud or negligence. These accusations can be expensive to defend against and can lead to serious penalties and even jail time if you’re not prepared for them.

Prepare yourself for these potential accusations by making sure you understand what actions could potentially be considered fraud or negligence. Set up standard operating procedures that help you avoid any misdeed or even the appearance of misdeeds.

In addition, it’s important to make sure that you have sufficient safeguards in place to protect your private property from professional liabilities. Strong business formation documents are a great start. They can ensure your personal property is safe from professional errors or missteps.

Contracts

Contracts are another important safeguard. These can put legal barriers in place that can defend you from frivolous and unfounded accusations. Laying out a grievance procedure in your contract can help you avoid the uncertainty of the courts. It can also limit damages and give you more time to properly respond to these allegations.

Insurance Agents

Insurance agents work as complicated intermediaries between massive corporations focused on profit and individuals who entrust their dreams to these corporations for protection. The situation often works out to the satisfaction of all, but sometimes things go expensively awry. When that happens, insurance agents can be attacked from one or both sides.

Because of this exposure to liability from both sides, it’s important that insurance agents take steps to protect themselves and their assets from professional problems. This includes structuring the company properly to avoid exposing personal assets to professional liabilities.

Misrepresenting Coverage to Insured

Insurance policies are complicated, and it’s often necessary to simplify terms in order to explain them to potential purchasers. However, sometimes that simplification causes people to feel that they were deceived in the sales process.

Because insurance agents are also acting as salespeople, there might be accusations that the misrepresentation was deliberate and made for profit.

Failure in Duty to the Insurer

Insurance agents also have a responsibility to the insurer that they represent. Failure to live up to those responsibilities can expose an insurance agent to significant liabilities. Sometimes, failure is simply making a mistake. Other times, it might be a failure to properly follow company instructions or even exceeding the express or implied authority granted by the insurance company.

In these cases, the insurance company stands to lose significant money, and they will seek to recoup it from your small business as an insurance agent.

Financial Advisors

Financial advisors are in a uniquely precarious position. Not only are people or businesses trusting them with their money, but financial advisors are also giving recommendations in the highly uncertain world of finance. Trying to maximize returns and/or protect wealth can sometimes equate to educated gambling. In a turbulent market, even the best bets can crap out. When that happens, people can turn their bitterness on their financial advisor with various accusations of misconduct and attempts to recoup their losses.

For this reason, it’s important for financial advisors to take key steps to protect themselves from their clients and the law. Proper structuring of your financial advisor business can insulate your personal assets from business liability. In addition, strong contracts can clearly define expectations and responsibilities, providing an additional layer of protection for your business and personal assets.

Disclosing Secrets

Financial advisors are in a position of trust. Whether you’re advising an individual or a company, you will have access to secret information that you are supposed to keep confidential. Confidentiality agreements are common, and you should have your own lawyer look these over before you sign them.

In addition, you should make sure your own contracts have the best protections for you and your business against accusations of disclosing secrets. Plus, as always, protect your personal property from business liabilities.

Personal Profiteering

Being in a position of trust and recommending people make certain financial moves can give you the opportunity to make a profit of your own based on other people’s actions. This could be encouraging people to make financial moves (or making these moves for them) in ways that profit you. Or it could be combining your money with clients’ funds in ways that reduce your costs and improve your profits. Perhaps you might even be accused of embezzlement.

You need to be prepared for these accusations even if your operations are completely above board. Strong contracts, defensive company structure, and, of course, clear knowledge of the law will all minimize your risks.

Breach of Fiduciary Duty

As a financial advisor, your duty is to always act in your clients’ best interests. Even when you do this, you might be accused of not living up to this responsibility, especially when the market takes an unexpected turn.

Make sure you understand your duty and know how to avoid even the appearance of impropriety. Spell out expectations and responsibilities in your contract to make it clear what you will and won’t do and always protect your personal property.

Help for Small Businesses in Denver

One of the benefits of being a professional like an accountant, insurance agent, or financial advisor is that you can strike out on your own to increase both your freedom and income. However, when you are on your own, you also bear all the potential risk from legal hazards associated with your profession. Even if you think you understand these hazards, getting advice from a legal professional is smart.

Since 2010, Elizabeth Lewis has been helping small businesses in Denver and along the Front Range with a wide range of legal matters. She is focused on building strong relationships with her clients so that she can understand their needs and make specific recommendations for their profitability and growth. She has always been dedicated to providing expert legal counsel to small businesses. That experience has allowed her to understand what legal strategies work best for small businesses facing legal challenges. Her results-oriented approach means that she always offers practical advice for your business based on your specific industry and stage of growth.

To learn how Elizabeth can provide legal help to you as an accountant, insurance agent, or financial advisor, please contact the Law Office of E. C. Lewis for a consultation.