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Advisers warned to watch what they write

Advisers need to be careful what they write on client file notes or they could find themselves in an awkward situation if their clients end up reading them, a lawyer says.

Tuesday, November 13th 2012, 7:37AM 20 Comments

by Niko Kloeten

Keeping adequate notes is important for advisers looking to avoid getting on the wrong side of the Financial Markets Authority, which has identified this aspect as one Authorised Financial Advisers (AFAs) can improve on.

But according to Kensington Swan partner David Ireland, advisers also need to ensure they don’t “doodle” anything on their notes that could come back to haunt them.

For instance, he said advisers should avoid writing derogatory remarks about clients on their notes because these notes could potentially be “discovered” (made available to the other party) in the event of a court case.

“The rules of discovery are fairly complex; there’s no hard and fast rule other than never write anything on a client file that you would have reservations about the client seeing,” he said.

“There are instances of that exact thing being used against the person writing the notes, often in an employment law context but quite a similar analysis.  There’s often an indication of bias or pre-judgment, that type of thing.”

But advisers don’t even need to end up in court for clients to find out what they’ve written about them; Ireland said clients can request their files under the Privacy Act.

“There are very limited conditions in which they can’t access the whole file.  If you’ve got personal information about somebody they’ve got the right to access it.”

Ireland said these sorts of comments, if discovered, could also land advisers in hot water with the disciplinary committee.

“Assume it’s going to be discovered… it’s a terrible way to live your life but equally you never know what’s going to happen around the corner.

“It’s a balancing act; you don’t want to unduly limit what you record because that in itself is going to get you into strife.”

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Comments from our readers

On 13 November 2012 at 8:02 am Barry Read said:
Good words David. Also if a client file is reviewed or audited, either internally or externally, don't file the report in the client file, it could then become part of discovery as well. A trap for young players.
On 13 November 2012 at 9:03 am Amused said:
Well, Duh! - do we really need a lawyer "lecturing" advisers and pointing out the bleedingly obvious about client file notes?
On 13 November 2012 at 10:23 am Niko Kloeten said:
Amused, I called David to ask him about the issue so he wasn't "lecturing" anyone.
On 13 November 2012 at 10:45 am Carey Church said:
Amused, I don't think this is 'bleedingly obvious' at all. What you write in your file notes is crucial.

In a dispute, every dot, line, note is pored over for potential incrimination. Thanks David and Niko for raising this topic.
On 13 November 2012 at 11:02 am Zak said:
How about this for novel idea 'don't write derogatory remarks in the first place'. By definition a client is paying the adviser for service and deserves a higher standard of care ... surely we can work these things out for ourselves and do not need a lawyer to state the obvious??? We have bigger issues to work on than this surely...
On 13 November 2012 at 11:27 am Amused said:
Niko, If the FMA is saying to advisers that we all need to watch what we write on client file notes I take that advice on board. I just don't need a lawyer sorry telling me how to run my business. I'd much rather have advice from someone like Barry Read who actually has a strong background in the industry he's speaking about.
On 13 November 2012 at 3:36 pm brent sheather said:
replying to amused : given the recent form of the industry and its current state I think I would rather have advice on the industry from just about anyone..as long as they weren't in the industry.
On 13 November 2012 at 3:39 pm brent sheather said:
and who is barry read anyway..I haven't heard of him and nor has google although a search did bring up chopper read lol
On 13 November 2012 at 4:02 pm Trevor Slater said:
Brent Sheather - with respect, try using NZ Google. Barry and his company IDS Limnited appear in the first few entries.
On 13 November 2012 at 4:42 pm brent sheather said:
oops.you are right !
On 13 November 2012 at 6:01 pm Stan Charles said:
Crikey, Brent Sheather got something wrong.
On 13 November 2012 at 9:59 pm Kevin said:
Who is Brent Sheather?
On 14 November 2012 at 6:55 am Bill said:
Must be the first time ever Brent Sheather was wrong !!

He did 200 hrs study to get his AFA and learnt nothing !!

What a guy !

There are old advisers, won't-be told advisers, and know-it-all advisers

I doubt there will ever be any old won't-be-told or know-it-all advisers
On 14 November 2012 at 8:24 am First timer said:
Amused - without wanting to raise your ire further - if I were you I would check David's credentials in this area before intimating a lack of relevance. Try NZ google I hear it is quite efficient.
On 14 November 2012 at 9:06 am Andrew Logan said:
This is a very prudent topic and I don't think it is pointing out the obvious at all. In isolation (during a discovery/Fact Find interview or review meeting)it goes without saying that advisers should not write derogatory remarks as file notes, but record keeping extends far beyond this. File notes in a good CRM can (and should) include all email correspondence related to the client (these could include emails to and from accountants, lawyers, internal staff, underwriters, fund managers) telephone conversations and all other contact made with the client which is relevant to your terms of engagement with them. This record keeping is not only important for compliance but also to allow for management reports to be run detailing how much time you and your staff spend on each client, relative to their value to your business. I think its great advice to remind all staff to be cognoscente of their choice of words and tone when saving notes or sending emails about clients.
On 14 November 2012 at 10:18 am brent sheather said:
to add even more irony and humour to my silly comment about who is David Read..the title is advisers shd be careful what they write...
On 14 November 2012 at 10:59 am Amused said:
First timer - As Zac said admirably above surely we can work these things out for ourselves without having a lawyer to state the obvious? I’d like to think most advisers aren’t entirely stupid and reliant on other people to know how to deal with their clients professionally. There sure seem to be an awful lot of people in the training/compliance and legal profession who would have us all believing otherwise!

Brent Sheather - I think you mean Barry Read NOT David right?
On 14 November 2012 at 12:01 pm brent sheather said:
oh god I'm going back to bed
On 14 November 2012 at 12:49 pm Chopper said:
Lets leave this Brett guy alone.
On 14 November 2012 at 5:49 pm The Editor said:
We are closing comments on this article.
We thought the story was useful to advisers, even if some think what was being said was obvious.

It's not often you get free legal advice!

Interestingly we have been asked previously to do some pieces around the basics of the legal system.
Commenting is closed



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