Client Complaints: Managing Risk, Expectations, and Regulatory Obligations

Client complaints are an inevitable part of doing business in financial services—but how firms respond to them can significantly influence regulatory, reputational, and operational risk.

In this month’s NSCP Currents Live webinar, “Properly Responding to Client Complaints”, compliance and supervision leaders Kim Chapman, Chief Compliance Officer at Berthel Fisher; Ellen Sheridan-Cona, Counsel at Eversheds Sutherland (US) LLP; and Brenda Vaughn, Vice President of Advice and Wealth Management Supervision at Ameriprise Financial, Inc., shared practical insights drawn from their experience across firms of varying size and complexity.

Key Highlights:

Structure and Consistency Matter

While large firms may rely on centralized systems and dedicated teams, smaller firms often use a more hands-on approach. In both cases, regulators expect firms to capture complaints promptly, categorize them consistently, and apply escalation procedures uniformly.

Categorization, Trending, and Documentation

Proper categorization drives reporting obligations, supervisory responses, and training priorities. Even at smaller firms, repeat issues involving the same advisor, product, or allegation can constitute a meaningful trend.

Front-End Controls Reduce Back-End Risk

Many of the most challenging complaints arise from complex or illiquid products. Clear disclosures and proactive client communication can help prevent misunderstandings that later escalate into complaints.

Resolution Requires Judgment

Not every complaint is justified, but every complaint warrants a thoughtful response. Firms should have clear frameworks for investigation, resolution, and—when appropriate—temporarily separating advisor-client relationships during the review process. 

Final Takeaway

Effective complaint management goes beyond meeting regulatory requirements. Firms that invest in clear processes, proactive supervision, consistent training, and strong documentation are better positioned to manage risk and respond confidently to both clients and regulators.

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