Skip navigation
CRM Can Be Your Sword And Shield In A Fiduciary World

CRM Can Be Your Sword And Shield In A Fiduciary World

You firm's most valuable tool for revenue generation can also be the most successful compliance contrivance. 

Sound too good to be true? Implementing a client relationship management tool (CRM) is not only a tool for acquiring and keeping clients, it is your best line of defense against the Department of Labor's new fiduciary rule. Documenting client interactions, discussions and investment recommendations is now an absolute necessity for superior client service and an regulatory defense. 

Any practice management coach worth their fee will tell you that a CRM is a useful tool in driving growth in your practice. From sharing of information to issuing tasks for completion, CRM supports accountability, a hallmark of successful partners. 

Just talk to the most successful advisory teams you know, and ask them how they manage their time. A fair bet is a disciplined approach to leveraging a CRM is the response. 

This sales approach is also the most valuable discipline for remaining compliant as a fiduciary under the new DOL Rule. Documenting client interaction provides you the ability to provide better client service and provides significant protection against regulatory and compliance concerns. In litigation or a regulatory investigation, having a written document, kept in real time, lets you show what you understood from the conversation and what you’re trying to accomplish. 

Generally, retail clients prepare posthumous notes from what they remember. As memories can be vague and colored by events, your documentation will hold real weight in fact finding. For regulatory inquiries, you can provide details that assist in clarifying your decision making to the examiners, with no need to try to frame how the decision was made. Your CRM provides the process and approach to decision making, allowing you to defend yourself with facts you documented and not fuzzy memories of what you (or your client) remember.

As valuable as utilizing a CRM is for documenting decision making on investment change recommendations, it is equally important for those times when no change is recommended. In fact, a CRM is one of the only ways to be able to demonstrate compliance with Best Interest Standards when a recommendation to hold is provided to a retirement client. 

Trading is not the marker of a well-managed account, and when you can prove through documentation that your investment recommendation of a hold is merited because of a disciplined investment approach, no regulator can question your adherence to the standards. Consistently providing recommendations based on clients' best interests is more important than consistently beating benchmarks, but without documentation there was no recommendation, just an account with no trading.

A consistent approach to documenting client interaction with a CRM proves a firm has a culture of compliance. This term, a lighting-rod for FINRA and SEC, will be equally important in front of a plaintiff’s attorney. 

Finally, supervision for advisors and brokers alike will entail proving that investment recommendations are in the client’s best interest. This will require adding a compliance review process that monitors how recommendations were developed for individual clients. Leveraging a CRM will make this review process more efficient and act as an invaluable audit trail for the regulators when they come out to visit.  Without your CRM, this process will be time- and paper-intensive.  If you are acting as the portfolio manager, chief marketing officer and the CCO, like many small advisors, you need to be able to leverage technology and process for efficiency. 

A CRM is an important tool for growth in your practice.  If you have one or tem team members, tens or hundreds of clients, a CRM can make growth easier and achievable by providing sales, service and compliance leverage.  By April of 2017, a CRM will no longer be a great concept to add to your practice, it will be a necessity to operate. 

Matthew Reynolds is the chief compliance and operating officer at David A. Noyes. 

TAGS: Technology
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.