How to prepare for a home audit

This article appears in the October 2021 issue of Advisor’s Edge magazine. Subscribe to the print edition, read the digital edition or read the articles online.

Advisors have experienced a lot of firsts over the past year. With so many working from home and with firms embracing flexible work for the long term, advisors may now be facing their first remote compliance audit.

Dealers shouldn’t be confronted with red flags upon entry to the home. Don’t be “working at the end of the kitchen table with an open laptop with documents thrown about,” said Zachary Pringle, an associate at Babin Bessner Spry LLP in Toronto. “You need to ensure you’re operating under best practices and that you’ve developed good habits.”

Ideally, your office should be a separate room with a door that locks with a key, Pringle said. If that’s not possible, a cabinet that locks is “non-negotiable” for client documents and your own notes. During the workday, documents shouldn’t be left around the home, he said. A “momentary lapse in judgment can be someone’s downfall.”

A potentially overlooked privacy consideration is ensuring computer monitors aren’t close to windows where they could be visible to neighbours, Pringle said.

Advisors should also ensure conversations with clients are private. “No one can overhear the conversations,” Pringle said. “Not your children, not your spouse.”

When talking to or about clients, he suggested using a low voice. Also, “it’s best practice not to say aloud the names of the clients or the financial products that you’re discussing” unless you’re in a private space where others won’t hear.

Craig Gilchrist, an associate at Torys LLP in Toronto, also warned about cyberthreats. Advisors should log in to secure servers according to their firms’ protocols and follow the federal government’s guidelines on cyber hygiene, he said, such as refraining from conducting confidential business using unsecured Wi-Fi. Regulators have similar tips.

In the absence of office infrastructure, advisors must ensure their documentation is filed properly (e.g., with the firm’s cloud-based document management service). “Without the team surrounding them, advisors need to be the ones ensuring that their documentation is up to date,” Gilchrist said.

He also said advisors should ensure note-taking complies with firm policy, and that notes can be readily understood years from now. Diligent note-taking must continue even with comfortable, longstanding client relationships. “Treat every interaction like a fresh interaction and be documenting it,” Gilchrist said.

Thorough documentation is even more important as the client-focused reforms, which include increased documentation expectations for advisors, are implemented this year, he added.