4 Easy Ways to Improve your Client Files

It’s inevitable that, at some point, each adviser will be subject to a compliance review and a financial planning audit.  When this time comes, a well-organised adviser can really reap the benefits of ensuring client files are complete and easily checked.

This blog presents a few handy hints and tips that can help advisers improve the quality of their client files.

1. Don’t Cut Corners with the Fact Find

As painful as it may be for most financial advisers to admit, it’s extremely common for IFAs to avoid spending that crucial extra few minutes that ensure the fact find is filled in clearly and correctly.

Of course, this may not affect the legitimacy of the advice or the suitability of the recommendations that you give.  However, if a complaint is made, or an FCA investigation is held and you can’t provide evidence for the advice you’ve given, then justifying yourself will be tricky. Your rationale may have been sound and you may have followed your firm’s advice process properly, but without a proper record of the client-specific facts that formed the basis of your decision it’ll be hard to make your case to the regulator.

There’s often the temptation to cut corners with fact finding just to get it “out of the way” and over to the paraplanners, but just spending 5 extra minutes up front recording details lucidly will pay dividends later on.

Furthermore, even if you don’t get investigated, the extra clarity will benefit your administrators and paraplanners by saving their time and, by extension, the company’s money.

2. Always Document your Clients’ Protection Needs

When a client comes to an adviser and is focussed on his/her pensions or investments, the discussion within the client meeting tends to centre around things like financial goals, investment risk and cash flow modelling.  Rightly so, most would say, but, irrespective of the client’s circumstances or objectives, an adviser should always discuss protection provision.

The teams at Adviser Outsourcing and PowerPlanner all too often come across fact finds where the protection section is blank.  Indeed, on occasions, it has simply been filled in with “client did not want to discuss” or, even worse, just “not applicable – investment advice”.

If a financial adviser’s being paid to deliver a holistic financial planning strategy, and if that client unexpectedly dies without adequate protection in place, then it’s going to be hard to put up a defence if a complaint is raised and the adviser has a fact find like the above!

That said, this doesn’t mean advisers should feel obliged to give protection a big sales push.  You may have a discussion with the client and hear back from them that “protection is really expensive and I feel young and fit so I don’t want to pay the premiums” or words to that effect. If so, this is what needs to be written in the fact find. You can even quote the client’s comments verbatim and put that on record.

While clients might be dismissive of protection, advisers cannot afford to be, so make sure the fact find doesn’t come across that way and has a robust record of the conversation that was had, even if that conversation was simply the client rejecting the idea.

3. Regularly Refresh your Research

When IFAs talk about research, what it means in practice usually differs from person to person, but there is a general agreement that it’s needed as justification for recommending a financial product, platform or service.

A good quality client file needs to be backed up by appropriate research that affirms your rationale and advice process.  Again though, this is not just about ensuring advisers get through file reviews or FCA investigations unscathed.

Just as a clear fact find helps paraplanners write better suitability reports, providing comprehensive research helps you present your recommendations to the client, and gives them confidence in the advice as they can see your breadth of knowledge and the diligence with which you’ve gone about your work.

Exactly how you keep your research refreshed is down to the IFA. Many advisers nowadays favour wrap platforms for the majority of clients, and there are many good platform research tools out there that you can use periodically to ascertain whether your clients are still getting the best deal. 

You don’t need to review the whole market of wrap platforms or DFM/MPS offerings for each client, but demonstrating that you’re periodically refreshing your solutions of choice is a key part of being a compliant independent financial adviser.

4. Have a Nomenclature for File Names

The task of a file reviewer, at the best of times, is an unenviable job that requires a great deal of diligence, concentration and attention to detail.

It’s therefore not hard to imagine how much more time consuming and error-prone the file reviewer’s job becomes if key facts and evidence are hard to find because files are saved in arbitrary places and have meaningless names generated by the office scanner!  Having a sensible process for naming and saving the documents held on a client file is really useful.

This holds true whether you use a back office system or if you just keep files on shared drives. One of the easiest and most useful things you can do is to name your files using a consistent convention.

A good naming system should encapsulate the following:

• the date of the document;
• the client name, or at least some mnemonic reference to the client;
• the provider; and
• a hint as to the content.

For example, you may have scanned a document and accepted the default name that looks like 220731090601.pdf but auto-generated file names like this offer no clue as to what the document actually represents. Instead, a name like Singh G – Aviva – valuation – Jul 22.pdf makes it obvious, so when a colleague is looking for the valuation on Mr Singh’s Aviva plan, it’s easy to find.  If you have lots of files to organise, putting in place a folder structure will help, although this does generally require more diligent administration to ensure documents get saved in the right folders and subfolders.

Summary

As outlined above, there are several small things you can do that, when combined, really make a big difference to the quality of a client file.

It’s also worth remembering that the file is not just for the FCA, but also for administrators, reviewers and paraplanners. Making their lives easier ultimately saves advisers and the firm time and money, so it’s worth taking control of your data and ensuring advisers spend that extra few minutes to bring their fact finds up to standard.

Adam George
PowerPlanner