Handling Compliance Items that Inconvenience Your Clients

4 min read
October 06, 2016



There is an undocumented struggle between compliance and convenience that every Chief Compliance Officer must come to terms with.

Many times, a client will need to sign an additional document or resign a document you already executed. Or maybe a client may be forced to receive a disclosure or a document that they are not interested in reviewing.

And in some cases, there may be types of investments that the client wishes to add to their portfolio, but these investments are either not suitable for the client or are unreasonable from investment management perspective.

So how should you handle compliance items that inconvenience your clients? Consider these factors to help you decide what to do.

Why Is Compliance Easy to Overlook in Client Meetings?

It helps to understand why advisors may try to skirt compliance rules when it comes to enforcing them on clients.

If the sales pitch isn’t sufficient enough to get the client to sign the advisory agreement, then rather or not the form is filled out correctly is a non-factor.

If the prospect is meeting with you to decline the engagement proposal, then the ADV and Privacy Policy delivery requirement is a moot point.

So it’s completely natural to prioritize production ahead of compliance and believe that the former is more important to your RIA than the latter. Simply recognizing that this conflict exists between compliance and convenience is the first major step to overcoming the hurdle.

Reputational Risk of the Advisor or Financial Planner

One big incentive for advisors to try to circumvent compliance policies and procedures is reputational risk. It’s embarrassing to go back to the client to ask them to sign a form again, especially if it’s because you omitted a minor detail.

And mistakes happen. They’re understandable. You have so many other items to cover in a client or prospect meeting. The pressure of signing a new client or maintaining an existing client can outweigh the perceived importance of having the client initial in every requested location on a form or document.

Compliance is often not the most important thing at the time of a client interaction.Therefore, the only way to combat this is to make a concerted effort to make compliance a priority in client meetings.

Here are a few tips to make it happen:

1. Thoroughly Review All Forms and Documents Prior to the Meeting

You already review aspects of the client’s investment profile, current investment performance, recent money movements, and to research anticipated investment recommendations. But you also need to set aside some time prior to the client meeting to review any outstanding compliance items and make sure those items are covered as well.

2. Prepare Documents Requiring Client Signatures

Use those handy “sign here” stickers to make sure you are having the client sign in all appropriate locations on the first try. If possible, use a highlighter on the documents to further reduce the chance that a signature or initials will be missed.

3. Check with Your Compliance Officer

It’s easy to make assumptions about what documentation is needed from a compliance standpoint. But there can be small nuances in relationships, account types, services provided, and so on that may merit additional signatures or client acknowledgments.

If you are the compliance officer, then double check your compliance manual and the regulatory background on what you are doing for the client to make sure all bases are covered.

4. Clearly Communicate Compliance Expectations

Most everything is easier for clients to deal with when they are notified up front of what to expect. If your clients know that they will be receiving your ADV and Privacy Policy Annually, then they are less likely to complain about “junk mail.”

If your clients understand they need to sign a separate form each time they want to execute a wire transfer, or open a new account at the custodian, then they will be prepared to fulfill this request.

Dealing with Dissatisfied Clients

It’s very easy to drop the compliance ball when a meeting concludes with you sitting across from a dissatisfied client.

Perhaps the investment portfolio is underperforming the benchmark. Maybe a failed money movement request caused the client a delay in a particular transaction. Or maybe husband and wife get together in the room and they simply can’t agree, causing an uncomfortable environment for everyone.

It is at this time, when it seems the slightest inconvenience to the client could cause significant damage to the relationship, that compliance issues tend to drop off advisors’ radars. To address this, practice removing yourself from the client’s temporary emotional state.

Empathy is a key component to an effective relationship. But the ability to separate yourself emotionally is sometimes equally as important. It is a good practice to stand firm on compliance needs in order to maintain stability in both volatile markets and volatile client relationships.

As unfortunate as it may be, compliance is by nature inconvenient. There are numerous things that a compliance officer can do to minimize this inconvenience for the firm. Setting up the right expectations can make the biggest impact.

Becoming effective in communicating compliance requests confidently and clearly should be a priority for both compliance officers and financial advisors.


Scott GillAbout the Author: Scott Gill is the Director of Keeping Us Compliant here at XY Planning Network. Outside of the office, Scott enjoys watching sports, exercising, and operating the charitable organization he created upon his father’s passing. You can connect with him on LinkedIn.

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