May 09, 2012
When it comes to handling disputes with investors, financial advisors are in a much better position to mount a defence if they have made detailed notes on the rationale behind a trade or strategy. That was a key message Laura Paglia offered in her presentation at the Federation of Mutual Fund Dealers conference yesterday.
"Unless advisors can show a paper trail," Paglia said, "they're in for an uphill battle."
Most advisors rely on the Know Your Client (KYC) form to record important information about their clients relating to suitability but, Paglia said, the KYC form alone is inadequate.
"The industry has been overly reliant on the KYC and has elevated its importance to biblical proportions," Paglia said. "But it's only a guide. If there are extra notes in the file, it's like finding a pink diamond when defending against a complaint."
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