Lack of regulation on CRM note-taking can put advisers in sticky software scenarios

Modifying information could end up costing advisers money, which happened in one recent case

Jun 3, 2016 @ 12:01 am

By Alessandra Malito

A recent Finra case underscores the trouble advisers can find themselves in when modifying notes on their client relationship management systems.

In May, the Financial Industry Regulatory Authority fined Ameriprise representative David B. Tysk $50,000 and suspended him from the industry for one year for backdating 54 new entries and changing 13 others in his CRM.

By altering his notes and then failing to inform his firm or customer of these changes, Mr. Tysk violated Finra Rule 2010, which requires all advisers conduct business with high standards.

"In this world, especially when it comes to digital media, there is always a record, and this idea to change the record is always a very dangerous practice," said Todd Cipperman, founding principal at Cipperman Compliance Services.

Regulators don't have clear rules for how advisers should use this software and CRM vendors all approach tweaking notes differently, which highlights the quandary for many in the advisory business. Some tech providers allow alterations while others ban it. Many have an audit trail to keep track of changes along the way.

Advisers are on their own for figuring out the rest: what to put in the note, how much time to allow for updating a note and what happens if something is forgotten. Advisers need to be aware that, when it comes to technology, anything can be tracked, said Sue Glover, president of Susan Glover & Associates, a financial services technology consultancy company.

"A lot of it is preventative," Ms. Glover said.

But clarity, at least from the regulators, is not within reach, Ms. Glover said. She said she doesn't see Finra and the Securities and Exchange Commission creating rules specifically about technology.

1. Include everything you need to - the who, what, where, when, why and how - so that if you were to look at the note years later, it would make sense.
2. Write the note as soon as the event happens.
3. Don't change notes just for typos, which don't change the context.
4. Restrict changing notes to a couple of days after an event because anything else will not be considered valuable anyways.
5. Have a policy in place within the firm for modifying, and monitoring, notes.
Source: Based on interviews with Greg Friedman, Todd Cipperman and David Mehlhorn.

"You don't really need the software to be compliant," Ms. Glover said.

Chris Grande, firm principal of Walnut Hill Advisors in Belmont, Mass., sees notes as a way to protect advisers.

"It is a benefit of advisers to have a good note system because it is their self defense on their due diligence," Mr. Grande said. He copies and pastes his notes into his CRM from an application called Evernote, where he can include photos and audio notes.

CRMs serve as a valuable tool for advisers, one that houses client contact information as well as notes about recent meetings and conversations. According to a 2015 InvestmentNews Adviser Technology study, 90% of the more than 200 advisers surveyed used a CRM. Advisers can follow a few steps to ensure they're taking the higher ground when creating notes, including instituting policies for modifications and writing the note as soon as an event happens.

Greg Friedman, founder and chief executive of advisory firm Private Ocean, and president and founder of CRM vendor Junxure, said his firm has an internal policy when it comes to adjusting notes. Not only does the system have an audit trail, but users at his firm must add a line as to why they are making a change within the note.

"Advisers should have some guidance for staff as to what they should do to change a note," he said.

To prevent confusion, follow up notes should not be placed separately from the original note, said John Rourke, chief executive and co-founder of Starburst Labs, producer of Wealthbox CRM. His software allows advisers to modify notes, with an audit trail, "without having to write a note about a note and the reason you're entering that note," Mr. Rourke said. "That's laborious."

In Salesforce Financial Services Cloud, advisers can edit notes but the date is auto-logged. Edits have versions that can be restored, a spokeswoman said.

Act!, a CRM product owned by Swiftpage, allows advisers to update, edit and backdate notes. The create date, the creator of the note and who last edited the note are aspects of the system that cannot be changed, said Xavier Musy, chief architect of Act!. Content of the note and the date it has attached are not locked by default because there is value in specifying that information, he said.

"That type of note is meant to be open and editable," he said.

Redtail is a financial adviser-focused CRM vendor that disagrees. The company allows advisers to comment on a note, but the note itself cannot be edited. David Mehlhorn, director of sales at Redtail, said half of the users loved that feature, and the other half hated it.

"It is also there to protect you in the event of any dispute," Mr. Mehlhorn said. "While you may know you will do a good job and would never go in and do anything ethically wrong, you can't always be sure about those around you."

Any imperfections in the note, such as grammar and misspelling, aren't the end of the world, he added. It's better to document the event and conversations with clients properly.

Experts say advisers should weigh the quality of their notes more heavily. Mr. Cipperman said changing a note days after an event makes the information less valuable. Mr. Friedman said inserting relevant information from the get-go is just as important, too.

"I don't think frankly a lot of thought goes into what should be in these notes and it is important as a firm grows beyond a couple of people to have policies," he said. "What these notes are supposed to encompass can be used to protect and be used against you."


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