St. Petersburg Office
6414 1st Avenue North
Duty of Care = Notes
Notes = Duty of Care
Quality note protocol = substantially more arbitration proof practice
Today’s best practice addresses questions/thought processes since the initial Thursday Tip regarding Duty of Care documentation.
As previously indicated, our office requires a Duty of Care or equivalent notes submitted with all paperwork. However, if you adopt the mindset that the Duty of Care enables you to standardize your note process you will be able to improve the efficiency in your office.
Some of you will have noted in the Reg BI FAQ document that the Duty of Care Worksheet must be completed and provided as part of the Trade Monitor alert. The Duty of Care worksheet will not negate any obligations to provide requested documents like an ALIL form or Letter of Non-solicitation. What it will do is document the rationale behind the execution of any and all transactions.
For example, a client calls with a request for funds. In reviewing their portfolio the best option to fill their request is by selling a UIT that has not yet matured.
Complete a Duty of Care worksheet to document the conversation with the client and how you arrived at selling the UIT/why it was in the client’s best interest.
Put a copy in your client file. Establish an inter-office procedure based on who bears responsibility for addressing Trade Monitor alerts. By completing the Duty of Care at the time of transaction, it can be simply/quickly uploaded as response to Trade Monitor alert flags to minimize time needed to address these.
We are also suggesting a customized supplemental page to the Duty of Care worksheet.
Within your practice you have standard procedures. You may have your client complete a Riskalyze profile to determine their suitability. You might generate a Financial Plan for every prospect. When considering a Variable Annuity you review a Morningstar hypothetical on the proposed product or do a side-by-side comparison of features of existing policy and recommended new policy. By customizing a supplement page you could easily indicate what you reviewed with client and/or uploaded with paperwork for supervisory review. This adds three additional levels of efficiency to this document.
If you indicate something is uploaded and it hasn’t made it to the OSJ queue we know to start in the vault rather than calling you.
If you indicated you reviewed something with client that would facilitate the review process it can be requested.
The checklist becomes a reassurance to a future regulator that you had a consistent, documented procedure for recommendations.
As with any customized supplemental information you aren’t restricted to a static checklist. It could be fillable, enabling you to reference product/transaction specific disclosures provided to client like FINRA 1345 disclosure, or delivery of fund family prospectus.
If you would like help building a customized supplemental page specific to your practice, Sean is happy to work with you.
Is there information that didn’t fit in a Duty of Care worksheet category that you consider pertinent to arriving at your recommendation? The supplemental page is a great way to capture the unique items that you want to make sure are considered in the review process.
Authorization to Release Client Information
Several of our offices have asked us what the procedure was if a client wanted their information shared with their own third parties. Securities America, does not have a defined procedure, but is willing to accept a letter of instruction. We felt that this was not sufficient, so we recreated a NPH form to use with SAI. This form better protects you and your office, as well as giving you a defined procedure for dealing with clients who may have a diminished capacity; satisfying question 1.60 in Representative Profile section of Branch Audit Questionnaire.
If you would like to use this form, please add your business card disclosure at the bottom, and submit to AdTrax referencing our submission 2284962.1 as a related submission. If you would like help with things like formatting, or adding your logo to the form, please let me know as I am more than willing to help. Once your version is approved, I can help you make it a “Fillable PDF” for convenience. I can also help you create a template for use with DocuSign, so clients can fill this out and sign electronically.
Authorization to Release Client Information
Third Party Vendor Confidentiality Agreement
Now that we have been through our first few audits, one of the things that has come up is missing confidentiality agreements with third party vendors that may have access to client account information. Securities America would not give us a standard confidentiality agreement to use, but does not have any issues with the one below. Before your audit, please have all third party vendors that could possibly come into contact with client account information, (cleaning services, IT providers, paper shredding service, etc...) sign this confidentiality agreement. If they do provide their own version, please make sure that you have a copy on file. This will satisfy question 10 in the Data Protection section of the Branch Audit Questionnaire that we sent as part of the 8/2/18 Thursday tip.
Financial Planning is a great service to be able to provide to existing clients as an added value. It is also a great service to offer to prospects as a way to introduce yourself and your experience to someone new. Those who are still evaluating the viability of this feature within your practice may find a Guide to Building a Successful Planning Practice to be helpful. Those who are trying to find ways to introduce the service to clients may find The Importance of Financial Planning brochures useful.
If Financial Planning is a component of your business you will have to process paperwork with SAA. Please use the Financial Planning Check List below to make sure you are not missing anything when meeting with clients.
Also below is a generic list of financial planning services. This version is an example of one that is not client facing and is only to provide a list of services to the reviewer. You can add, delete, or rephrase services based on what your office offers. If you would like a client facing version as a way to show clients/prospects other services you offer, we are more than willing to work with you on content, layout, disclosures, and branding.
Financial Planning Check List
Financial Planning List of Services
Variable Annuity Purchase Checklist
This checklist includes form requirements as well as reminders about what information to include, and what general questions we would like answered in your explanation. You can refer to our 10/11/18 Thursday Tip for a thorough explanation on how VA business is reviewed.
Variable Annuity Purchase Checklist
Alternative Investment Purchase Checklist
There are two versions of this checklist, one friendly for both Pershing and NFS accounts. Both of them can be used if the Alternative Product will be held directly with the sponsor company. They both include form requirements, and reminders about training, how to submit, and a guideline to Securities America’s restrictions.
Alternative Investment Purchase Checklist (Pershing)
Alternative Investment Purchase Checklist (NFS)
Money Market Options
Uninvested cash may be a small portion of your client’s brokerage account but may also lead to the most questions from your client. Am I getting more for the money sitting in my brokerage account then I would get with it sitting in my bank account? Are there options that would give me a better return but still give me the ability to purchase other securities if I wanted to add something to my portfolio?
You have access to a variety of resources to help you answer those questions. Within the Resource Center, you can search for Money Market and have access to the information for both clearing firms. On the right of the Resource Center page on the topic, you will see a Public Client Materials link which will take you to the Bank Deposit Sweep Program page. Here you can review the current Rate Charts, Disclosure Documents, Money Market Rate info, and FAQs. The sweep program rates are tied to total balance so this will enable you to help a client determine where a deposit of available cash would put them on the spectrum between 0.17% and 0.85% annual yield to make an informed decision about where to keep their cash.
If you would like to review other Money Market options for your client you would start at the Business Center>Products & Research>Approved Products, scroll almost to the bottom of the page to find Mutual Funds. There are two separate lists depending on whether you are doing research for a commission or fee-based account. Once you access the excel spreadsheet for the relevant option we recommend using the Sort & Filter Option to Custom Sort by Prospectus Objective and then Morningstar Rating to filter the data to be more user-friendly for this specific research project. The spreadsheet includes returns for various time frames. Just a quick scan of the Total Return 1 Yr column shows a range from 0.52 to 2.30.
For Advisory accounts, fees will only be taken from the Core Account Investment Vehicle so if you elect to move your client into an alternate money market you will need to be sure to send money back to the default money market option periodically in order to receive your fees. You can automate this process.
For NFS reps – use the PIP/SWP/EFT form. On page two, SWP section check C and list the position you want sold (this is not considered a conversion). On the last page check D ‘Credit the proceeds to my core account’. This process, selling a position to go to cash, works for both qualified and non-qualified. Please note: not all funds are PIP/SWP eligible so be sure to check eligibility column on approved products spreadsheet as part of your research.
For Pershing reps – use the Periodic Buy/Sell form to sell the money market position. Proceeds will automatically default to the core account.
Please be mindful of the timing for fees being deducted from client account to ensure the best selection of time frame on the relevant form to move from money market to core account. Taking into consideration the change in fees over time, you may want to add the periodic sell form to your Annual Review packet as a reminder to verify whether any adjustments need to be made to the instructions.
Annual Reviews- Additional Items to consider
Our 8/15/18 Thursday Tip explains the Securities America policy for conducting annual reviews. Since then we have come up with some additional suggestions that may be helpful for your office.
If an account was opened with electronic signature, this is a great time to ask the client to fill out a Signature Verification form. If you do not have a notary in your office, also be sure to make a copy of the client’s drivers license.
It is also a good time to obtain or update an Authorization to Release Client Information form if you are using them.
Make sure that all of the client’s accounts are reporting to SAI (CRM tab) and any other account aggregation services that you use (Albridge, EMoney, etc.)
Am I being paid on this account? Make sure that any fees or commissions that you should be receiving are actually in your paycheck! Tina has been working tirelessly to find and resolve compensation issues, and she has made great progress in finding and resolving the underlying issues that are causing them. That being said, if we are unaware of an issue we cannot fix it. Take a second to spot check your Revenue Assessment and Trail Commissions reports from the Report Dashboard in advantage. If you need help deciphering the reports or if you believe you have found a mistake, please let us know.
Once you are done with your reviews, please make sure to document them properly. Review notes and the information used should be stored in an easily retrievable way, either in the Securities America Vault, your CRM System, or your own client files. While it is not a requirement to keep a copy in the SAI vault, we do recommend doing so to make it easier for auditors to find them.
Kudos to Patti in Naperville for reminding us of the value of a Best Practice.
A client was scheduled to come into the office so she was preparing the office’s client review package. She searched for the client within FrontPoint so they would be able to verify whether any information needed to be update and she couldn’t find the client. Their office has a backup filing system in addition to uploading paperwork to the vault so she was able to retrieve the New Account form and change of dealer form originally signed by the client 11/11/17. As many of you will remember, that was when we were processing 100s of sets of paperwork daily. Some of you lived through the nightmare of having to reload paperwork that you knew had been submitted because it couldn’t be found in the system. We went through the process of asking for exceptions on stale dates for anything reloaded, but there was no way to know for certain that we caught all the issues unless we physically compared back up files and vault files, or there was a commission hold. Fast forward to 2020, and by following a Best Practice established within their office, this admin discovered a set of paperwork that doesn’t appear to have been captured during the paperwork deluge. Because they had a backup filing system she was able to retrieve the documentation to facilitate the process of ‘adding’ the client. When they come in for review they can now verify the information is still current and sign the current version of the new account form.
So take an extra minute when you are on the phone with your client, or prepping for an annual review, to make sure they are actually in the system.