Fiduciary Links: How to address clients who are withholding information
Posted by Bennett Aikin on August 26, 2013
>>>A new survey from Securian Financial Group highlights the bad investor habit of withholding information from their advisors. According to the survey results, 29% of investors are withholding information that is relevant to their financial situation. Health concerns, other investments, marital problems, debts, and loans given to friends or family are among the most prevalent topics cited as being withheld. The reasons cited for withholding information are what you’d expect: feeling the information is too personal, not relevant, embarrassing, or just haven’t had the time yet.
This is a big problem for a couple of reasons. For one, any of those examples given of withheld information has the potential to drastically change a client’s financial status and, in turn, impact the quality and effectiveness of the advice the advisor is able to give. For another, in the event a client dispute arises, questions are sure to arise as to what the advisor did, didn’t, or should have known when providing advice.
Therefore, advisors shouldn’t take it at face value that all relevant information has been provided. They must take it upon themselves to educate clients as to what constitutes relevant information and the importance of disclosing that information to their advisor, as well as instituting sound procedures for managing the process.
In our training programs, we stress the following steps for ensuring sufficient data is collected:
- Have the client provide information in three categories: financial resources, financial obligations, personal situation.
- Communicate clearly to the client how the withholding of information could potentially create negative consequences.
- Have the client sign an acknowledgment that he or she understands these consequences and has provided all information relevant to the scope of engagement.
- Maintain a file of all information provided and communications around the disclosure of information.
- If you have reason to believe the information may be incomplete, it may be necessary as a fiduciary to restrict the scope of engagement to only matters for which information is complete or even to terminate the relationship.
Now on to the best links of the week:
News and columns from the leading trade, consumer, and mainstream media:
- Investors want advisers with complete view of finances, according to a CFP Board study. [InvestmentNews]
- For advisors being offered up front recruitment bonuses, make sure you understand all the ramifications [InvestmentNews]
- "Retirement" doesn't resonate with young investors [InvestmentNews]
- Retirement more confusing than Health Care, according to a Charles Schwab survey. [ThinkAdvisor]
- From Michael Kitces: On having a unique value proposition to gain a branding edge [ThinkAdvisor]
- Bob Clark chimes in on the Bob Veres plan for advisor reregulation [ThinkAdvisor]
- How advisors can rebuild public trust, five years after the financial crisis. [FinancialPlanning]
From the organizations/associations/government/academia:
- In conjunction with ThinkAdvisor, we've just released the results of our annual Fiduciary Survey of Advisors. More on this to come. [fi360]
- 12 best practices for fiduciaries evaluating tactical asset allocation [Center for Due Diligence]
- Consumers prefer holistic financial planning to specialization. [CFP Board, coverage from ThinkAdvisor]
- Jane Jarcho named head of SEC's Investment Adviser/Investment Company Examination Program. [SEC]
- With medical marijuana a burgeoning industry, investors need to look out for investment scams [FINRA]
- Auditors auditing their own financial statements among the problems discovered in broker-dealer audit programs [Public Company Accounting Oversight Board, coverage from InvestmentNews]
From the blogs:
- A summary of Social Security - understanding all the options. [AllThingsFinancialPlanning]
- Trending Topics for ERISA Plan Sponsors [FiduciaryNews]
- A State of the Art ERISA Benefits Decision from the First Circuit: Gross v Sun Life [BostonERISALaw]
- The difference between financial advisors [TheInvestmentFiduciary]
- Revamp your billing system. [PracticeManagementBlog]
- Building a stable financial pyramid. [FinancialDucksinaRow]
Articles your clients are reading (or should be):
- Investors increasingly seeking professional advice on college savings planning, those receiving advice doing better than those who are not [Fidelity]
- Sixty-six is the magic age: why retiring earlier could result in a 25% haircut to your Social Security. [InvestmentNews]
- Is a variable annuity right for you? [ChicagoFinancialPlanner]
- Get ready for retirement at any age. [USNews]
- Three reasons to delay retirement. [USNews]
- Is it time to change Social Security taxation? [USNews]
Have a link we missed? Leave them in the comments section or email us at blog@fi360.com. For more of the best links during the week, make sure you follow us on Twitter.
