by Tony Vidler
I still vividly recall getting that phone call from the complaints authority because a client alleged that I had misled them. Unless you’ve experienced one of those calls it is virtually impossible to describe the sinking feeling and immediate sense of paranoia…
…and so begins the game of Rock, Paper, Scissors.
Client throws Rock.
I try to beat it with Paper.
Complaints authority takes to it with the Scissors.
That’s the way the game plays out. EXCEPT…the right Paper beats everything. Paper wins every time in our game.
In my case I received a call from the Ombudsman’s office which began with “do you represent client X?” Once we’d confirmed who I was and who they were and that the professional relationship did exist, they advised me verbally of the substance of the allegations. This first preliminary step was to ascertain whether there was a case to be heard at all, so I was given the opportunity to submit my “version” before a decision was to be made on whether to hear the complaint.
The client alleged that I had sold them (a couple) a locked in retirement savings plan, which was heavily front-end loaded with fees and commissions (so much so that it took some 8 years to break even for the client), and that I had not disclosed these charges, nor advised them it was untouchable (locked in) until age 65 – and of course they had wanted to set up a savings plan which was flexible and could possible contribute towards a house deposit. Their statement of claim (the allegation) was detailed and convincing – right down to quoting parts of the conversation which had apparently been had some 8 years prior, describing my pin-striped navy blue suit and red tie, and remembering what time the meeting had been.
From the Ombudsman’s perspective this seemed at fist glance to be a pretty open-and-shut case. I WAS their adviser. They DID have a retirement plan as they had described – complete with all the limitations they described. It was even true that I used to get about in a pin-striped navy blue suit and had a leaning towards red ties for a while. But there was one critical flaw in the complaint.
The clients had bought the retirement savings plan about 3 years before I met them.
I had actually met the clients as a referred lead initially, and essentially engaged in a comprehensive risk planning exercise. While doing so and determining what cover they had we found that there was this retirement plan that had been put in place by an adviser who had since left the industry. As a professional I obtained their written authority to obtain information on it directly from the product provider, and was subsequently appointed as the “servicing adviser” by that supplier. There was no commission or income payable to me on it, but that was of no consequence to me. It was all part of the service, right?
Anyway, after the initial conversation with the Ombudsman I went to the client file (yes, it was a bulky paper file!) and within about 20 minutes had sent a copy of all of the contact notes, the initial engagement letter and meeting notes, and a couple of statements and pieces of correspondence showing that I had been appointed to service an existing contract put in place by someone else.
No case to answer. The Ombudsman thanked me for my time and the entire affair was done from start to finish in about an hour.
Paper won that game.
As it turns out, over the course of quite a few years of practice I had a couple of complaints – and paper won the game every time. Rocks were thrown,and people took to the records with scissors to try and cut out just the bits they thought might be useful ton their own arguments….but it is the entirety of the paper trail which provides defence.
I was reminded of this when reading a recent case summary from the Financial Services Complaints scheme (reprinted below). To be fair I have seen and heard similar stories fairly regularly as one of the things I do is provide expert witness services around financial advice processes and liability or negligence issues. Invariably when reviewing these situations there is 3 versions of the truth; the clients’, the adviser’, and the real one somewhere in between the other two.
What tips the balance of probability as to which version of the truth is most likely to be correct is the paper trail. The paper trail is the evidence of what transpired as recorded at the time of the event, or advice. The case below from FSCL appears to fit the classic mould of “he said…she said”…and appears to be an excellent example of a complaint that never needed to occur if there had been a robust paper trail at the outset.
Of course when I refer to a “paper trail” I am really referring to a robust audit trail. In reality it doesn’t matter what methodology or systems you use to keep client files, as long as you keep very very accurate ones – including contact notes. From as defensibility perspective electronic recording with automatic date and time-stamping in file formats which cannot be altered or amended later without also leaving a further electronic footprint is more solid evidence than a hand-scribbled post-it note placed loosely in a cardboard file. However, those post-it notes are better than nothing at all, especially if there is a continual stream of them in the client file and it is clearly a system (albeit primitive) of maintaining records.
The key point is that the processes and requirements of best practice advice, especially as dictated by regulators and professional standards boards, are onerous – but they are helpful. They are career savers.
At a conference a couple of years ago I was presenting a session along these lines, and it was opened for Q&A from the audience. An adviser in the room who I knew very well asked the loaded question:
“I’ve been doing this for over 20 years and only work with existing clients now. They all know me, trust me, and they hate all the paperwork. They are happy with how it works now, so why bother with all this #%8@! stuff?”
“because you cannot guarantee they will all remain happy with you forever”
He was willing to bet his career and business on clients not throwing rocks, or outside parties not wanting to take the scissors to him.
I’d rather bet on Paper.
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