It can be unnerving for an RIA to receive a complaint from a client because complaints can lead to potential litigation, monetary losses, and, in some situations, regulatory investigations that can harm an RIA’s business. Yet, the manner in which complaints are handled can often make a big difference as to whether the situation spirals out of control and results in legal and/or regulatory risk for the RIA. As an attorney, I’ve consistently seen that effectively handling client complaints requires adopting a well-crafted gameplan and avoiding common pitfalls. In this article, we will outline five common mistakes we see RIAs make when handling complaints and outline best practices for crafting an effective gameplan to handle such complaints.

Common Mistakes

These are the five most common mistakes we see advisers make when handling client complaints:

  1. Failing to Notify Senior Management: Before addressing the substance of a client complaint, it’s crucial to notify senior management. They can provide guidance on how to respond to the client and initiate the gameplan for handling the complaint.
  2. Delays in Responding: It can be unnerving for RIAs to receive a complaint, but procrastinating in communicating with the client can make things worse. I know I said in the previous point that it’s important to consult senior management before addressing the substance of a client’s complaint, but prior to receiving guidance from senior management on how to handle the substance of the complaint, RIAs can still send a note to the client acknowledging receipt of the complaint and communicate to the client that the firm is looking into the situation and will be back in touch as soon as possible.
  3. Inadvertent Admissions: In an attempt to appease an unhappy client, advisers may unintentionally admit fault when communicating with the client. It’s important to be empathetic without making statements that could be construed as admissions of wrongdoing before a full investigation has been conducted.
  4. Failing to Consult Legal Counsel: It’s the unknowns that can create legal and regulatory risk for an RIA when handling complaints. Therefore, legal counsel should be consulted so the adviser can get a full understanding of the ramifications that can arise if a client complaint is escalated to litigation.
  5. Failing to Get a Release: Resolving a complaint without obtaining a proper release can leave advisers vulnerable to future claims. Without a release, clients can still file a lawsuit despite a handshake agreement with the adviser to resolve the dispute.

What Does an Effective Gameplan Look Like?

An effective gameplan for handling client complaints should encompass the following critical elements:

  1. Effective Communication Strategy: Timely and transparent communication with the client is essential throughout the complaint resolution process. As we noted above, delays in responding will only make things worse. Advisers should establish a communication plan that includes regular updates on the investigation’s progress and any actions being taken to set the client’s expectations for resolution of the matter. This hopefully helps maintain trust and keeps the client informed.
  2. Effective Communication Protocols: When it comes to addressing the substance of a client’s complaint, it’s important for employees not to let emotions get the best of them. Advisers should approach the situation with empathy and professionalism, ensuring the client feels heard and understood. Defensiveness typically only makes things worse. On the other hand, as noted above, inadvertently admitting wrongdoing to appease the client can compromise the firm’s potential legal defenses to any future legal claims.
  3. Effective Investigation Protocols: A thorough investigation is the cornerstone of effectively handling a complaint. Advisers should have a clear process in place for gathering and analyzing all relevant information. This could involve reviewing transaction records, client communications, and any other pertinent documentation.
  4. Effective Protocols for Resolving the Complaint: Advisers should be sure to involve legal counsel in handling complaints to help understand their risks and strategize on whether corrective action should be taken. Advisers should work with legal counsel to explore the appropriate remedies, if any, to resolve the matter including whether any compensation should be provided to the client. Finally, advisers should work with counsel to craft a release that the client must sign to protect the adviser from future legal claims arising out of the dispute.
  5. Effective Training: It’s vital for advisers to train employees on how to communicate effectively with clients when handling complaints because the emotions often involved can cause employees to deviate from the gameplan when faced with a live complaint.


 While an effective gameplan will not guarantee that a dispute with a client will be resolved amicably, it can often be effective at minimizing the legal and regulatory risks that advisers face when such complaints arise.