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Fiduciary Links: How to address clients who are withholding information

Posted by Bennett Aikin on August 26, 2013

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>>>A new survey from Securian Financial Group highlights the bad investor habit of withholding information from their advisors. According to the survey results, 29% of investors are withholding information that is relevant to their financial situation. Health concerns, other investments, marital problems, debts, and loans given to friends or family are among the most prevalent topics cited as being withheld. The reasons cited for withholding information are what you’d expect: feeling the information is too personal, not relevant, embarrassing, or just haven’t had the time yet.

This is a big problem for a couple of reasons. For one, any of those examples given of withheld information has the potential to drastically change a client’s financial status and, in turn, impact the quality and effectiveness of the advice the advisor is able to give. For another, in the event a client dispute arises, questions are sure to arise as to what the advisor did, didn’t, or should have known when providing advice.

Therefore, advisors shouldn’t take it at face value that all relevant information has been provided. They must take it upon themselves to educate clients as to what constitutes relevant information and the importance of disclosing that information to their advisor, as well as instituting sound procedures for managing the process.

In our training programs, we stress the following steps for ensuring sufficient data is collected:

  • Have the client provide information in three categories: financial resources, financial obligations, personal situation.
  • Communicate clearly to the client how the withholding of information could potentially create negative consequences.
  • Have the client sign an acknowledgment that he or she understands these consequences and has provided all information relevant to the scope of engagement.
  • Maintain a file of all information provided and communications around the disclosure of information.
  • If you have reason to believe the information may be incomplete, it may be necessary as a fiduciary to restrict the scope of engagement to only matters for which information is complete or even to terminate the relationship.

Now on to the best links of the week:


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