Investment advisory services have grown exponentially in recent years. However, with the increase in advisors, there is also a rise in complaints from clients regarding mis-selling or lack of services. To maintain trust, it is critical for advisory groups to have robust complaint review processes. This article examines the common grievances faced by investment advisors and how firms can implement compliant and timely complaint handling mechanisms. Proper complaint review procedures help advisors resolve issues, protect clients, and uphold high ethical standards in the investment advisory space.
Fee and billing complaints are the most frequent grievance for investment advisors
Investment advisors charge clients in various ways, including as a percentage of assets under management, fixed fees, hourly rates or commissions. According to studies, fee and billing related complaints form the bulk of grievances faced by advisors. These include excessive fees, unauthorized fees, fee calculation errors, and inadequate disclosure regarding fee structure. To avoid such issues, advisors must be transparent about their compensation and ensure clients understand billing processes upfront.
Complaints related to poor investment performance are tricky for advisors to handle
While markets are volatile and losses cannot be avoided, clients often complain when their portfolio vastly underperforms compared to benchmarks. Advisors need to review if adequate risk profiling was done and asset allocation matches the client’s goals. Clear communication about expected returns and periodic reviews are key. For unwarranted complaints, advisors can present clients with documented rationales for investment decisions.
Advisors need dedicated resources to handle time-sensitive complaint procedures
Regulations often specify complaint handling timelines, such as within 30 days, to ensure quick resolution. Delayed responses due to lack of resources lead to bigger client grievances. Advisory firms must have sufficient staff to acknowledge complaints quickly, investigate, communicate with clients and track until closure. Advisors may also leverage technology solutions to efficiently manage the complaints process.
Frequent complaints indicate weak compliance policies and client engagement
An abnormally high complaint rate should push advisors to probe root causes. Are internal checks and balances lacking? Do client agreements fail to set proper expectations? Are post-account opening reviews and communication missing? Prudent advisors must periodically analyze complaint data to identify and correct such gaps through better compliance policies and client engagement.
For investment advisory groups, maintaining robust complaint handling procedures is vital to resolve client problems, uphold ethical practices, and retain trust. By quickly acknowledging issues, investigating with due diligence, communicating resolution timelines, and tracking until closure, advisors can achieve satisfactory grievance redressal. Frequent complaints should also spur reviews of internal policies and client relationships.