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How to Safeguard your Financial Advisory Business

The Financial industry is evolving rapidly; financial products are becoming more complex and there are ongoing updates to regulations. As an advisor, it is important to ensure you remain up-to-date with changes, understand how it impacts your client and business. If not, advisors and firms risk regulatory sanctions and irreparable damage to their reputation.  As a compliance professional, here are some tips to help you protect your business and your reputation.

Managing Client Expectations. The Know your client responsibility is not only important in helping advisors understand how to service their clients, it also helps clients understand themselves and capacity to invest.   Clients turn to financial advisors to manage their financial affairs, and sometimes clients may place an unrealistic expectation on their financial advisor.  This may be hard to believe, but some investors can get carried away by the excitement in the news.  Some clients believe if they invest in the stock market, their principal is safe and they can reap immediate returns or achieve grand scale success.  Having candid conversations with clients, financial advisors are able to manage client expectations, prepare clients for unexpected results and mitigate the likelihood of a client complaint.  If a client insists on investing in an unsuitable investment product, remind them of their objective. As their financial advisor, it is your duty to help keep them on track

Building A Client Profile. The New Client Application Form (“NCAF”) help advisors and firms get to know their clients’ financial capacity to invest.  By developing a client profile or synopsis, you are able to collect information that generally would not be captured by the NCAF. The synopsis should detail personal information about the client; such as their family, aspiration, hobbies, preferences, idiosyncrasies, personality traits, likes, and dislikes.  As an advisor, this will help you develop a deeper relationship and understanding of your client.  This may prove to be valuable in the events you are the target of a client complaint.   The information collected in the client synopsis may help regulators gain a better understanding of the client, your relationship and improve their ability to make a well-informed determination.  Being able to demonstrate the depth of your relationship with your client may remind clients of your care for them and their wellbeing.

Taking Notes. Taking notes is an advisor first line of defense.   The more detail notes kept on the decisions made in the client records, the better.  During client complaints, notes help both your compliance department and regulators piece together the events that led to the transactions under question.   When executing a client transaction, be sure to detail as much information as possible; simply indicating who gave the instructions, if it was solicited or unsolicited, date, time, security and quantity can certainly help you recall when the transaction took place, but we recommend offering more detail that outlines the conditions on how and why the transaction occurred.  This will help both you and the client remember what inspired the transaction and may potentially resolve any confusion.

When a compliance officer attempts to resolve a client complaint, they rely on client documentation, advisor notes and a testimony from both the client and advisor.  As a back office support staff, we try our best to collect all the facts and gain a full understanding of a problem.  Having a client profile, reinforced by ongoing notes paints a fuller picture and helps us do our job better.  Through these mediums, we are able to get a better understanding of your client and the relationship between you and your client.  Remember, this business is driven by word of mouth marketing and we understand that your reputation is everything.   This is why we recommend to vigilantly protect it; even if this means spending extra time explaining concepts to clients and keeping detailed notes. Once your reputation is tarnished, you risk losing everything you worked so hard to build.

Book an appointment with us now and lets discuss how we can help protect your financial advisory business.

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