The need for a comprehensive client database in financial advice

19 Sep 2024

First seen on Professional Adviser

You could give the best advice in the world, but it's likely to count for very little in the eye of the regulator if you can't evidence how when asked.

And if on occasions the advice you give isn't quite to such dizzying heights, then there'd be even more cause for concern if you can't pull up sufficient records which detail how you reached recommendations. This was important before Consumer Duty. Now the regulation is part of the everyday of running an advice business, it's critical.

This is something of an Icarus challenge for advisers. Spend too much time on record keeping and other compliance tasks and, unless you are going to work for free, your charges will cease to be good value. But you must be able to demonstrate that you offer good value under Consumer Duty. However, spend too little time on record keeping and you will be vulnerable to a Financial Conduct Authority (FCA) inspection visit uncovering holes in your records. That could lead to censure, fines and even being closed down.

The need for a comprehensive client database in financial advice

Firstly, you need a comprehensive database, that records all your client interactions. What you said, why you said it, how your clients reacted and why you believed that they understood the key points of your advice. And it needs to be searchable on multiple levels, so that when an FCA inspection says "show me your DB transfer cases in the last 12 months" or "pull up a random selection of your vulnerable customers" the database can yield the information quickly without anyone having to search manually through case files for examples of whatever it is the regulator needs to see this time.

Secondly, the best database in the world will be useless if you and your staff don't fully populate it every time. Perhaps entries can be made contemporaneously, while you are in front of a client. My own GP does this for medical consultations now. Whether this can work or not will hinge upon the time it takes you to make the records during a client visit or phone call. They will tolerate a short time, as it benefits them to know that you are making accurate records of what you have to do next. But there's a limit to how much of this clients will tolerate, as you are effectively asking a no doubt busy person to sit there idly while you do your own work.

Transparency is key

Quite apart from regulatory requirements, having a good client database will help you to run your business in an open and transparent way. Suppose there is a bit of a campaign brewing in the popular press about a particular advice situation, such as equity release. It would be good for you to get ahead of the game and be able to pull up equity release discussion records quickly and check that your own practices have been robust, and to be able to make prompt improvements if not.

Maybe you could even make a virtue out of such public interest campaigns that are going on. If you had the data that said in the last 12 months you had received 100 enquiries about equity release but had recommended a different course of action in 40 of those cases it would show how open-minded you were.

And if you were able to state that 98% of clients who had proceeded through to equity release had confirmed they were fully satisfied at the end of the journey that sort of figure on your website could provide warm reassurance to those considering it, or even the FCA.

It's worth taking some time to improve the searchability of consumer records so the next time there is a hot topic and the regulator wants to check something you are in a position to pull up the relevant records with ease. Whatever it may be.

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