Important Records Retention Concepts Every Financial Advisor Should Know

Document Management
Last updated
April 25, 2024

When it comes to maintaining records, every business and industry has its own unique set of challenges and requirements. Financial advisors and other businesses in the finance industry are no exception. They deal with both the day-to-day business concerns of recordkeeping and unique constraints brought on by industry-specific retention requirements. Knowing what to keep and for how long is challenging, due to complex language of legal requirements and the sheer number of documents that must be stored.  

For many financial advisors, this breeds confusion and frustration. In the worst cases, it causes issues that complicate the growth of their business. Fortunately, there are some clear steps to understanding how long to keep each document stored. These steps are found by checking a few factors to determine the proper retention period for a given record or document.  

Records Retention in the Financial Industry  

Financial records retentionTo understand how long they should keep a given document, financial advisors should consider two major factors. The first of these factors is regulation in the form of federal, state, and local law, along with governance from industry associations. These policies set uniform standards for retention across the finance sector, but they don’t do all the work of creating retention policy for a given record. The second factor, which is found in a record’s relationship with daily business functions and client relationships, has its own influence on how long finance advisors keep a given document or record.

The Financial Advisors Act of 1940, Explained 

One key form of governance for financial advisors is the Financial Advisors Act of 1940, which mandates both what kinds of documents and records financial advisors must keep and for how long. The list is extensive and covers everything from receipts and proof of expenditures to internal controls and standards of ethics. The FAA also offers a uniform retention period for all the records it addresses. The standard retention time mandated by the FAA is five years, with at least the first two years of storage taking place in the financial advisor’s principal office.  

This legislation, along with other regulations from the state or local level, offers a uniform standard of retention for investment advisors and their records. However, savvy professionals in the finance sector know that good retention policies can’t always be achieved with the minimum timeframes mandated by a given governing body. This is where the second factor in forming a retention policy for finance professionals comes in. 

Retention Beyond Legal Requirements  

The key to understanding the second factor in determining retention for a given record comes from understanding how that record informs vital business functions and client relationships.  The simplest explanation is often the best one, and that’s the case here: For financial advisors, retention should start with the minimum timeframes required by law but exceed that minimum whenever preserving a record is a necessary step to maintaining workflows and business functions or protecting and maintaining client relationships.  

When reduced to its key components, retention policy and understanding how long to keep records as a financial advisor are simpler concepts. If you’d like to learn more about retention policy, check out our ongoing series of blog posts breaking down retention and retention policy. And as always, the team at Secure Records Solutions is available with questions about retention, document storage solutions or other records management needs – contact us today 

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