Maintaining adequate books and records is a cornerstone of compliance for all investment advisers. While state and Federal regulations clearly outline recordkeeping requirements for areas like financials, advertisements, and trading records, there is a notable gap when it comes to documenting the delivery of services – especially financial planning services – necessary to justify the fees charged for those services. This lack of specificity can result in regulatory deficiencies or scrutiny, even for firms providing substantial financial planning value to clients, if records fail to consistently demonstrate that fees are ‘reasonable’ in relation to the services provided.
To minimize regulatory concerns regarding the reasonableness of advisory fees, firms can establish internal standards for service-related recordkeeping. For investment management services, documenting the entire client engagement – such as onboarding, reviewing and recommending portfolio adjustments in line with collected suitability information, opening and funding accounts, conducting periodic reviews, and rebalancing – can help clearly evidence the services provided.
For financial planning services, a similar approach to documentation can be applied to support regulatory compliance from the start of client engagement through all the steps that follow. This includes tracking the information-gathering process during the client discovery phase, followed by the research and development of a financial plan. Next, firms can document the delivery of the plan, check-ins throughout the year to support plan implementation, periodic meetings to work on or execute various aspects of the plan, and the annual review of the client’s situation. The review should also include updating the plan to account for significant changes and seasonal “to-dos”, assessing any advised assets that aren’t under the firm’s direct management, and responding to other financial planning questions that arise throughout the year. NASAA’s Fee Guidance highlights the importance of detailed recordkeeping for emerging fee models and provides practical context for advisers navigating these challenges.
A client service calendar can be an excellent tool to illustrate these services. It provides a structured outline of the firm’s service delivery, sets client expectations, and serves as a framework for systematizing processes as the firm grows. It also helps demonstrate to regulators what the firm’s ongoing financial planning services entail (though advisers will want to be certain that client files reflect that the adviser did everything the firm committed to in the client service calendar!).
Ultimately, the key point is that while the books and records requirements for financial planning services are less prescriptive than for investment management, advisers can take proactive steps to systematically document the services they provide to clients. This reduces the risk of regulatory scrutiny during examinations and helps regulators better understand what strong service delivery and comprehensive documentation for financial planning should look like!
