Wednesday, January 25, 2017

Best Practices for Documenting the Sale

By James Morris, Suitability Specialist

The importance of creating and maintaining detailed client notes cannot be overstated. The financial services industry is highly regulated and often litigious. Financial professionals (FPs) must protect the customer and themselves by taking copious notes of every interaction they have with or about their clients.

During my career, I have personally investigated hundreds of customer complaints, including investigations by a variety of regulatory entities. Without fail, the first item that is requested during an investigation is the client file, including the notes. If you do not have detailed notes, you are taking an unnecessary and potentially costly risk.

Detailed customer notes can help create the story surrounding purchases and recommendations as well as provide context concerning the customer’s risk tolerance and financial goals. During a long-term client relationship, many transactions can occur, which are suitable and appropriate for a customer at the time of purchase. However, if that customer passes away or the relationship sours, all of the transactions can be scrutinized by the beneficiaries or another FP. Your detailed customer notes can help you to defend the purchases and provide a narrative of the circumstances that supported the purchases during your tenure as the FP. 

When taking notes, either electronically (through an approved vendor if affiliated with a financial institution) or handwritten, it is important to write them as if they will be viewed by a regulator or an attorney on a big screen in a conference room. Write concisely, professionally, and provide as much detail as possible, including telephone contact dates. It is also prudent to include copies of customer e-mails and any other pertinent information in the customer file. Also, the product sponsor and/or broker/dealer applications generally have suitability sections that include a place to add customer notes, which should be completed to reinforce the purchase rationale.

As a best practice, completing a summary of all items discussed during a client meeting and requesting a client signature on the summary can enhance your client files and further support any recommendations. If you are a registered representative or investment advisor representative, please ensure that you are also satisfying your firm’s specific requirements around documentation. Finally, with the recent passage of the DOL fiduciary standard, documenting that the transactions you have recommended are both suitable and in the customer’s best interest will be paramount in your client notes.

Ann Arbor Annuity Exchange is committed to being a resource for your business. If you have any questions regarding client documentation, please call me.

James Morris can be reached at 800.321.3921 ext. 159 or at

James Morris | Suitability Specialist
Ann Arbor Annuity Exchange
Ph: 800.321.3924 x159 | Dir: 734.786.6159

Ann Arbor Annuity Exchange and its representatives do not give tax or legal advice. Please consult your tax advisor or attorney.

Designed for Financial Professionals.