Scott Tominaga discusses compliance

With twenty years’ service in the financial industry Scott Tominaga knows compliance.

Financial Advisors must show that they have followed all of the rules, when selling you a product. This is called compliance. There are many rules, but the basic concepts are that you have sold a client something that is appropriate for them in terms of the investment risk, so this is how much risk they are willing to take. It should be appropriate for them in terms of how long their money will be tied up and it should also be ethically fit for purpose. They would need to show the reasons for choosing this product over any other and this should not be in terms of their commission and they should also be able to show what their hopes and aspirations for the client were and what they were based on. If there is another similar product that would have suited the client, they would also need to show the reasons why this product wasn’t chosen.

Here are the top tips of what you must do as a Financial Advisor and ways to do it. You must ensure that you keep full and comprehensive records. This should include records of client conversations, where relevant to the advice, signed by both parties. In fact, this should all be recorded on an official document and signed by all of those who were present. You then need to ensure that these documents are easy to find if you were to be audited. You can discuss strategies with clients, if these strategies fit their investment and risk profiles, wants and desires. Providing a path for a client to follow is an acceptable way to give advice.

You are able to provide newsletters and leaflets to clients which might list investment processes and strategies, these should include what and who they are suitable for in terms of risk level and how long your money might be tied up for. The best way to produce a newsletter is to outsource to a firm who is fully proficient in all of the compliance rules or to at least get them to check your work. This will ensure that you have again followed all the rules and will not be sued for your advice.

You may say, why don’t you avoid newsletters if they are such gray areas, this is because it has been shown that contacting your client base with knowledgeable information can make a massive difference in terms of encouraging them to invest with your company. The process reminds them of your company, your expertise and makes them rethink their investments. Revisiting your portfolio is a necessity as your circumstances and the investments themselves can change. So, you need to produce great content in any newsletters or articles which will remind clients of your existence, and then you can advise them of products and portfolios that suit all of their aims. You must discount any other suitable products in an official document and explain the one you have sold them and why, then you need to make sure that all of the documents are signed and dated by all of the relevant parties and then ensure that you have an excellent filing system whereby the documents can be retrieved.

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