How much documentation is enough?

Read time: 5 minutes

Welcome to The Compliant Advisor, my weekly newsletter where I give compliance insights and actionable guidance to risk-proof your practice and gain peace of mind.

Today’s funny

“If you live to be one hundred, you’ve got it made. Very few people die past that age.” (George Burns)

Case in point

Note: Details are anonymized and summarized from a publicly available enforcement case.

The facts:

A former Quebec mutual fund dealing representative and bank branch manager pleaded guilty to two integrity-related offences.

First, the advisor asked a supplier to inflate a bank-paid invoice by $500 so he could later receive an equivalent credit for a personal event. The supplier instead alerted the bank and refunded the overcharge.

Second, the advisor used a colleague’s workstation, without the colleague’s knowledge, to process transactions through his own account so a friend could receive the preferential foreign-exchange rate available to bank employees.

Regulator’s decision:

• Imposed a five-year temporary suspension for the invoice incident (concurrent)

• Imposed a six-month temporary suspension for the unauthorized transactions concurrent)

• Imposed proceeding costs

Takeaways:

• Integrity obligations extend beyond how you deal directly with clients.

• An unsuccessful attempt can still have serious consequences.

• Compliance isn’t only about following processes but also about the decisions you make when nobody expects those decisions to become a compliance issue.

A CLOSER LOOK

You know you need to document your work.

But how much is enough?

Document too little and you may struggle to explain what happened months or years later.

Document too much and you can create a different problem.

Notes take longer to write. Files become harder to review. Important details can get buried under information that adds little value.

The goal is to have enough documentation to tell the story.

Think about the person reading the file later

Imagine that someone else has to review the file.

It could be tomorrow, a week from now or sometime in the future.

It could be your MGA, an insurer, a regulator, a colleague or even you.

Would that person understand what happened?

They don’t need a transcript of every conversation.

But they should be able to follow the key facts and decisions without having to guess.

For example:

• What did the client want to achieve?

• What information did you consider?

• What options did you discuss?

• What did you recommend, and why?

• Did the client raise any concerns or choose a different path?

Those details help create a clear story.

More isn't always better

There can be a temptation to treat documentation as a numbers game.

A two-page note must be better than a five-line note.

But length alone tells very little.

A long note filled with standard wording provides less value than six clear sentences explaining the client's situation, the options discussed and why a recommendation made sense.

The same applies to forms.

Having every box checked doesn't always explain the thinking behind the advice.

This is where documentation can become excessive. Advisors and their teams may spend time recording information simply because they have always recorded it.

That doesn't mean the information is useless, but you should ask if anything would be missing from the story if you stopped documenting it.

If the answer is no, the process deserves another look.

Focus more attention on the exceptions

Not every client interaction carries the same level of risk.

A routine administrative request may need a short note.

A complex recommendation may need much more.

There are also situations where a little extra detail can make sense.

Maybe the client rejected your recommendation.

Maybe they insisted on a course of action you were concerned about.

Maybe their goals seemed inconsistent with what they wanted to buy.

Maybe there was an unusual conversation that could become important later.

These are the moments when context matters.

Rather than documenting every file as if it carries the same risk, you can adjust the depth of your notes to the situation.

Create a standard, not a script

This doesn't mean every advisor needs to invent a new approach for every client.

A simple documentation standard can make the process easier.

Your standard might identify the core information that should normally appear in a file note, while allowing more detail when the situation calls for it.

That gives your team some structure without forcing every conversation into the same script.

It can also make documentation faster.

Instead of wondering each time what you’re supposed to write, you have a starting point and can use your judgment from there.

The test is whether the file can stand on its own

There may never be a perfect answer to how much documentation is enough.

But there is a useful test.

Imagine you aren't there to explain the file.

Could another person understand what the client needed, what you recommended, why you recommended it and what the client decided?

If the answer is yes, adding another paragraph may not make the file much stronger.

If the answer is no, another checked box probably won't fix it either.

Good documentation isn't about creating the biggest file.

It's about creating a defensible record of what mattered.

Before you go: 2 things

Have a great rest of your week!

Scott