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Client Confidential

Keeping your client’s financial data confidential is essential; here’s how to ensure what’s private stays private.

By Frank C. Bearden, Ph.D., CLU, ChFC

The client-advisor relationship is impossible to build without confidentiality. First and foremost, a prospective client must be able to assume absolute confidentiality to feel comfortable revealing financial concerns to an advisor—without candid sharing of financial data, the best advisor in the world can’t provide a client with appropriate recommendations. Secondly, confidentiality is evidence that the trust an advisor offers a client is true and sound. The advisor, in effect, says to the client, “To show my good faith in our professional relationship, everything you reveal to me remains confidential to our office and anyone we rely on as an outside resource on your behalf.”

Insuring client confidentiality
If an advisor intends to preserve client confidentiality within his practice, he must clearly state this within the policies of the practice. The following directives are the building blocks of client confidentiality and can form the basis of a sound privacy policy:

1. All nonprofessional employees should avoid client-identifying discussions with nonpractice personnel without client approval. This includes any description of a client that could be used to recognize the client’s identity and personal information.

2. Discussions with operational partners involved in securing or supporting insurance and investment products should be done with a clear commitment to extend client confidentiality. Operational partners should be precluded from selling or sharing client identification or information with their marketing partners without client approval.

3. Office records maintained on paper or in a database should be secure. Network connections the practice uses should also be secure from review by those outside the practice. Technical professionals can recommend and install appropriate firewalls and other insulating devices.

4. Professionals should not engage in client-identifying discussions with other clients or prospects without client approval. Referrals from a client certainly provide approval for identifying that individual as a client, but they usually do not provide approval for discussion of a client’s financial information.

5. Professionals within the practice should be precluded from client-identifying discussions with peers outside of the practice, unless an advisor is seeking co-advisory assistance to provide service to a client. Whether the peer advisor is to be compensated for assistance or not, he must agree to extend client confidentiality. If the peer advisor is to be compensated, the originating advisor should strongly consider making the client aware of the use of the peer advisor’s services. Because co-advisory assistance from peer advisors is such an important part of providing service to clients, this example may further point out subtle but possibly serious problems:

John and Bill are financial advisors attending a workshop concerning the use of client disclaimers as a possible estate-planning tool. John has a client with a complicated financial situation, and he wants Bill’s opinion on a possible recommendation. He does not intend to formally involve Bill in the service provided to the client. The conversation goes like this:

“Bill, I have a client similar to the examples we’ve seen in this workshop. I am roughing out some recommendations, and would like your thoughts on one of them, if you have the time.”

“Sure, let’s take a few minutes now before the next session begins. Right off the bat, is the client employed or retired?”

“He’s employed, self-employed as a physician. In fact, he is the only pediatric ophthalmologist in town. In addition, his wife has just received a very large inheritance due to the death of her father. They want to discuss the possible use of disclaimers in their estate planning.”

“John, I think I know who you are taking about. Anyway, what do you want to discuss? I have had a little experience with disclaimers—just enough to know I need this workshop to expand my understanding.”

At this point, John quietly turns to his friend and says, “Bill, if you do know my client, can I assume you will keep all facts about his circumstances confidential?”

Bill quickly replies, “Certainly,” and then again asks John what his concerns were.

If John fails to gain Bill’s assurance about client confidentiality, his friend may maintain confidentiality anyway. But by asking the question, John raises the likelihood that Bill will honor the request, thereby reaffirming his own promise of confidentiality to his client.

Frank C. Bearden, Ph.D., CLU, ChFC, is a field manager, financial advisor and agent in San Antonio, Texas, and a member of NAIFA-San Antonio. You may reach him at


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