There are only a handful of industries that are more personal or emotional than the financial services industry. In every relationship, it is important to know the expectations and boundaries. To address this issue, the financial services industry has adopted the concept of a Client Bill of Rights. The original framework developed in the mid 1950’s provides four basic rights and has since been expanded to eight. The basic rights include the right to safety, to be informed, to be heard and the right to choose. The expanded rights include the right to satisfaction, to redress, to consumer education and to a healthy environment.
If you are planning on hiring a financial advisor or are concerned about your current advisor and need a road map to steer the conversation, ask for the client bill of rights.
Investment firms and financial advisors go to painstaking lengths to address all major issues in this document. Here is a list of what should be included:
1. Customer Service – A client is entitled to courteous service from their financial advisor and all other associates.
2. Transparency – A client has the right to work with someone who will be available to:
- Answer questions
- Provide ongoing communication
- Participate in regular portfolio reviews
- Provide information about the advisor’s work history and background
3. Investment Recommendations – The client’s investment recommendations should be made based on the client’s needs and objectives. The client’s bill of rights should spell out the roles and responsibilities regarding a client’s pursuit of an investment that is inconsistent with the client’s investment objectives.
4. Compensation – The client has the right to know about all of the costs and commissions associated with an investment. Be sure to check on the policy regarding fixed income instruments. These instruments may include trading profits as part of the purchase price and aren’t required to be fully disclosed.
5. Timely execution – All transactions should be completed in a timely manner following best execution practices.
6. Errors – Any error should be corrected and complaints addressed promptly. If complaints are not addressed to the satisfaction of the client, they may contact the branch manager.
7. Confidentiality – The financial advisor and the firm have the responsibility of safeguarding the client’s personal and financial information. There should be language that addresses use and purpose of obtaining email address and telephone numbers.
8. Choice of financial advisor – The client has the right to choose their financial advisor and if the client feels dissatisfied or uncomfortable, the client has the right to change or have alternatives presented for consideration.
The above are some of the highlights of what you should see on the client’s bill of rights and presents an opportunity to get a solid understanding related to the risks, rewards, use of alternative investments, financial planning strategies. In addition, many firms have also taken the time to draft a copy of the client’s responsibilities. This document, like the client’s bill of rights should serve as conversation starter with your current or potential advisor about how they will interact with you. Again, take the time to read it thoroughly and understand your rights and obligations.