The general view of updating clients’ “know your client” (KYC) form is that the process is a pain for clients and a necessary evil for registered advisors, only required for compliance purposes. However, KYC form updates often are a missed opportunity to improve your relationship with clients and to grow your business.
From the client’s point of view, the task can be perceived to be meaningless for them if you merely have an assistant populate the form with information obtained from the previous form clients signed.
Why do clients neglect to to sign these forms and return them to their advisors? Clients don’t bother as they perceive this process to be meaningless as it is a “tick-the-box” exercise for their dealers and advisors. Remember that your job is to serve clients, not the other way around. Having clients sign a meaningless form they received in the mail is asking them to serve you, your dealer and compliance department.
More important, this approach to updating the KYC form not only is meaningless and a pain for clients, it’s not compliant with the KYC rule. That’s because it’s your obligation to know your clients at all stages of the relationship. Updated KYC forms are evidence of this. If there is no telephone conversation or meeting, then the updated KYC forms are an exercise in futility for both clients and advisors.
An update done in this manner will serve only to appease your compliance department — if clients sign and return the form to you. This approach will certainly not lead to improving relationships with clients and help you grow your business. In fact, it will ultimately lead you to lose clients and could even land you in hot water.
If you’re asked how you conducted your KYC form updates in an audit by either your dealer or your regulator, not having any evidence of calls or meetings with clients may get you a reprimand or even worse.
Furthermore, the actual process you followed for a KYC form update also might be revealed during an investigation if a client complains, alleging you didn’t keep up with their changes. You will be under scrutiny. This is not fun at all.
So, how can you approach this exercise to protect yourself and grow your business? Here are some steps to do that:
1. Shift your thinking altogether. Consider KYC form updates to be an opportunity, not an aggravation. This process is a chance to check in with clients to review the progress they’re making to meet their goals. Do they need to save more? Will they maximize their RRSPs and TFSAs for the year? That gives you an opportunity to grow your business.
2. Gain a greater understanding. Having a meeting with clients to update their KYC forms provides you an opportunity to improve your relationships with them. Rather than asking clients if there are “any changes” in their personal situations, this is an opportunity to show clients you have a sincere interest in helping them adjust or meet their goals.
Although clients may not have any new assets to invest at that given moment, the more meaningful touch points you have with them, the more likely you’ll be the first one they call upon when they receive a bonus or inheritance.
3. Develop a new process. Use the KYC form update as part of a new process to help clients achieve their goals. Waiting for compliance or your supervisor to send you an email reminding you to update clients’ KYC form will lead you to rush the process just to meet a deadline. Instead, put reminders into your calendar proactively for the year ahead on which clients to contact each month. Then, contact every client to explore if their circumstances have changed.
For example, people change jobs more frequently these days. In some cases, they’ll even reinvent themselves and change vocations. In addition, people also get married, divorced, have children, blend families, or begin to care for an ailing parent. How could you possibly know this and help clients adjust their goals if there are no meaningful conversations with them?
If you just send an updated form that has the old information clients have given you, or you just ask your clients quickly if they have any changes to report just to meet a deadline, that’s a waste of time both for you and your clients.
Instead, reinvent your KYC form update process to develop closer relationships with clients as well as to grow and protect your business.