The only thing more important than how you communicate with your clients is how you DOCUMENT those communications with your clients.
Some mistakes we can simply learn from and move on. When people realize they’ve overlooked any part of the essential record keeping processes, it’s often too late. If you get caught up with the wrong client, beneficiary, or attorney and your files are less than impeccable, your practice and livelihood could be at stake.
Here are the top four forms to keep in a client file to:
- Show a regulator that you are acting in the client’s best interest
- Remind a client (and their beneficiaries) that you and your clients are on the same page
- Protect your practice
1) 84-24 PTE Disclosure Form
A proper disclosure of any conflicts of interests, incentives, and commissions on any transactions funded by qualified dollars is required, per the DOL Fiduciary Standards. Whether you are insurance-only licensed or in the securities world, be sure that you have access to some sort of 84-24 Prohibited Transaction Exemption (PTE) Disclosure Form.
Take it a step further and do your homework on the forms provided to you to ensure that YOU are being protected in addition to your upline or the carrier providing the form.
These forms must be stored in your own file for the client – most carriers do not require them (or even want them) at this point. Whether it’s the 84-24 PTE Disclosure form or something else like it, we are going to have to get used to this next level of disclosure documentation, even on fixed products. They aren’t going anywhere anytime soon.
Do not make the mistake of thinking that this disclosure requirement has gone away since the DOL has faded into the background. Effective today, here are our obligations when funding products with qualified funds:
I. Impartial Conduct Standards:
Requires agent to act in the client’s best interest:
o Avoid materially misleading statements and receive no more than reasonable compensation.
o Duty of Loyalty – do not be influenced by any factor including compensation that rises above the best interst of your client
o Duty of Prudence - requires you to provide the same prudence, care, skill, and diligence exercised by any prudent agent faced with similar circumstances
II. Non-Disclosure Requirements:
Record keeping requirement that requires you to:
o Retain disclosure and acknowledgement forms and any additional sales material or documents provided to your clients for a period of six years
III. Disclosure Requirements:
Disclose the following information and retain record of this disclosure for six years:
o Disclosure relationship to the insurance company as an independent agent
o Sales commission
o Description of chares, fees, discounts, penalties
o Conflicts of interest
Contact me here to get the Kestler Financial Group 84-24 PTE Disclosure Form. This version of the form offers a greater level of protection for you than most carrier versions.
2) Data Gathering Worksheets
We all know we should heavily focus on getting a comprehensive understanding of a client’s current situation and goals before making a recommendation.
And it would just be silly to go through the process of gathering any of the following information without retaining it properly:
- Statements of net worth
- Balance sheets
- Account statements
- Risk tolerances
- Beneficiary Designations
Being thorough in your fact finding and data gathering can also be directly tied to the DOL Rule. Just like we had to show our work on our math homework when we were growing up, we must show our work leading up to the recommendation of a product or investment.
Contact me here to get some of the tools our advisors use to gather information.
3) Client File Note
Allow me to share with you some of the best advice you might ever get:
Every contact, or attempted contact, with a client or prospect must result in an updated record.
It’s not the Friendly Mrs. Jones who referred you to her bridge group that you need to be concerned about – its Mrs. Jones 10 years down the road when she starts to become a little forgetful. It’s her children, who were never involved in her finances until her health began to decline. It’s the plaintiffs’ attorneys who “remind” her of what you did or didn’t say.
Disputes often become a matter of “he said – she said” and the court will almost always take the side of the client.
Hopefully you never find yourself in a litigation situation. If you do, you’ll find yourself either trying to remember what was said OR referring to notes you’ve kept on client conversations. Even the simplest of notes written at the time of the transaction or conversation are worth much more than a recollection made by either party. So keep your files up to date.
Many top advisors use Client File Notes to protect themselves- have them at your desk, at home, in your briefcase and make it easy and a habit to pull one out and take a couple quick notes including:
- Client Name
- Time of conversation
- Method of conversation
- The reason for the contact
- What was discussed
- Any action items
If you’re a paper file type of guy, you can pop it in your client file. More of a digital filer? Scan and send it to yourself and save it on your computer/CRM. Either is fine.
Contact me here to get a sample Client File Note.
4) A Keep Warm Letter
I strongly encourage providing your clients with a Keep Warm Letter when an application is submitted or a transaction is completed. A Keep Warm Letter is a written correspondence that should accomplish three goals:
- Help to eliminate buyer’s remorse by showing professionalism and reviewing why they made the decision in the first place
- Allow you the ability to summarize the benefits of their decision
- Create a clear paper trail of disclosure
Remember to focus on the benefits instead of the features of whatever you are recommending. Specific product features change over time. Benefits can last a lifetime.
Be careful when using templated documents and communications. Since they can be used regularly, it can be easy to overlook small details or leaving things out when editing documents. Make sure all irrelevant information is removed and there are no errors. Double and triple check to make sure the “Warm Letter” you’re sending Sally doesn’t have any of Larry’s objectives on it.
Contact me here to get a sample Keep Warm Letter.
Use a Customer Relations Management (CRM) System! There are a ton of great one’s out there. To access a list of the Top CRM’s, you can reference the following:
As always, please share this video blog with your social media accounts and other advisors you believe will find this beneficial. AS ALWAYS, have a beautiful and productive day.
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