Common Compliance Mistakes to Avoid and How to Address Them
Compliance is a cornerstone of our profession, extending far beyond simple box-ticking exercises. Our ongoing file reviews have revealed several recurring issues that require our attention. This email aims to provide a comprehensive overview of these common mistakes and offer practical solutions to address them effectively.
1. Inadequate Record-Keeping
The Issue:
Proper documentation of advice and supporting notes are important components of a client file. Reviewers expect to see clear, accurate documents that support your recommendations. Remember, if it’s not in the file, it’s as though it never happened.
How to Address:
- Develop a habit of immediate record-keeping after each client interaction
- Utilize digital tools or apps that facilitate quick note-taking
- Ensure your Statement of Advice (SOA) contains sufficient detail and clearly explains your reasoning
- Use comprehensive file notes and work papers to provide additional context
- Implement a system to regularly review and update client files
2. Insufficient Risk Profiling
The Issue:
Risk profiling goes beyond answering a routine series of questions. Standard questionnaires often fail to capture a client’s true attitude towards risk, potentially leading to misaligned advice.
How to Address:
- Engage in in-depth conversations about client goals and risk comfort levels
- Look for discrepancies between stated goals and risk profiles
- Consider using scenario-based questions to gauge real-world risk reactions
- Regularly reassess client risk profiles, especially after significant life events
- Document your risk profiling process thoroughly, including any discussions that influenced your assessment
3. Misuse of Templates
The Issue:
While templates can enhance efficiency, over-reliance can lead to generic advice that fails to meet individual client needs and regulatory expectations.
How to Address:
- Use templates as a starting point, not an end product
- Customise each piece of advice to reflect the client’s specific situation
- Avoid generic recommendations and repetitive product suggestions
- Ensure your advice clearly demonstrates how it addresses the client’s unique circumstances
- Regularly review and update your templates to reflect current best practices and regulatory requirements
Remember, compliance is not just about meeting regulatory requirements; it’s about protecting our clients and maintaining the integrity of our profession. By addressing these common issues, we can enhance our compliance practices, better serve our clients, and safeguard our business.
I encourage you to review your current processes in light of these points. If you need any clarification or additional support, please don’t hesitate to reach out.
