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BISA Portfolio Podcast
BISA Portfolio Podcast
Navigating Customer Complaints With Jarrett Jacobs and Debi Lucke
In this episode of the BISA Portfolio Podcast, BISA Regulatory & Compliance Education Committee member Connie Capco of Northern Trust Securities talks with Jarret Jacobs of Fifth Third Securities and Debi Lucke of Ameriprise Financial Services about their approaches to navigating the world of customer complaints. They discuss the fine line between a simple service issue and a formal complaint, the importance of effective complaint management systems and the potential regulatory implications of mishandled complaints.
About Connie Capco
Capco is the director of sales supervision for NTSI Wealth Brokerage and responsible for day-to-day sales supervision and client-facing sales support for the dual registrant broker dealer / registered investment advisor. She serves as a liaison between wealth brokerage sales, NTSI operations, NTSI compliance and wealth management risk and control with the goal of creating efficient, frictionless fulfillment of products and services. Her extensive industry experience helps to drive growth in Northern Trust’s brokerage business and to further enhance the client experience through an integrated approach with wealth management partners. Capco earned a Bachelor of Arts in international business with a business management minor from Eckerd College in St. Petersburg, Florida.
About Jarrett Jacobs
Jacobs serves as the chief compliance officer for Fifth Third Securities, Inc. broker-dealer and registered investment adviser. He is responsible for the compliance and risk-related matters surrounding Fifth Third Securities’ retail and capital markets lines of businesses, including compliance with U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) rules and regulations. Jacobs has over 25 years of experience in broker-dealer and investment advisor compliance. Prior to joining Fifth Third Securities, Inc. in 2006, he served as RIA Compliance Officer for Raymond James Financial Services.
About Debi Lucke
Lucke is the director of the complaint resolution team at Ameriprise Financial Services, LLC, in Minneapolis, leading a team of compliance professionals who review and respond to customer complaints. She has worked in the broker/dealer field for more than 30 years, primarily in compliance and specifically in the customer complaint space. She is a subject matter expert regarding the rules and regulations surrounding customer complaint reporting and helps develop policies and procedures to ensure these obligations are met. Lucke is a member of the FINRA Complaint Initiative Committee and has served as a member of various working groups within the committee associated with regulatory reporting, as well as an Ameriprise Chairman’s Award for Excellence Finalist in 2021.
BISA is the leading financial services industry association dedicated to serving those responsible for the marketing, sales and distribution of securities, insurance and other financial products and advisory services through the bank channel.
Hello everyone, and welcome to this episode of The BISA Portfolio Podcast. I am Connie Capco. I'm the director of sales supervision here at Northern Trust Securities. I'm responsible for the day to day supervision of our broker dealer and RIA. And today I'm speaking with two of my fellow regulatory and compliance professionals, Debi Lucke of Ameriprise Financial, and Jarrett Jacobs of Fifth Third. We're speaking today on a hot topic. I know our listeners are all familiar with customer complaints. First, I want to encourage everyone listening to subscribe and rate this podcast and share it with others in your network if you enjoy. Debi and Jarrett, can you both introduce yourselves?
Debi Lucke:Sure, Connie, thanks. Like you said, my name is Debi Lucke. I'm a director over at Ameriprise in compliance. I lead the complaint resolution team, which consists of 15 individuals, and I've been with Ameriprise for almost 15 years, and before that, I worked at another regional broker dealer in town for 19 years, and the last 13 of those were in the complaint space. So I've been handling customer complaints and dealing with all the fun rules that go with that for quite a while.
Connie Capco:And Jarrett?
Jarrett Jacobs:I'm Jarrett Jacobs. I'm the chief compliance officer for Fifth Third Securities. We're a little bit smaller than Ameriprise, but we're a broker dealer, investment advisor, with approximately 1400 associated persons and 1100 locations. We have both a retail and capital market segments. I've been in the securities compliance game for a few years, since 1998, and glad to be part of this panel.
Connie Capco:Thank you, Debi and Jarrett. You both have a wealth of experience, and I'm sure you both have some stories you can share as well. But let's get to our first question: what is the formal definition of a complaint? More precisely, how do you define the difference between a customer service issue and a formal complaint?
Debi Lucke:I can kick off and basically say that we follow FINRA rule 4513 and the guidance put forth there, which is pretty basic. It states that it must be a grievance from a customer, a prospect or person authorized to act on behalf of a customer involving activities of the member or a person associated with the member that relates to the disposition of securities or funds of that customer or a transaction or solicitation or execution of a transaction. So the difference we see that's pretty clear between a complaint and a service issue is clients have issues and concerns quite frequently, but if they're concerned about, you know, their advisor didn't send them a birthday card this year, I mean, we've seen things like that. We wouldn't consider that a complaint. It doesn't relate to the disposition of their funds or securities or a transaction. So we're really looking for things that tie directly to their account and their account activity that they're doing with the firm, versus just sort of servicey issues, oftentimes, which we just refer to the field RP to address directly with them.
Connie Capco:And Jarrett, what are your thoughts?
Jarrett Jacobs:Yeah, definitely the definition of FINRA Debi went over is spot on. But as we've all experienced, there's unfortunately, sometimes communications, it's unclear if it's a customer complaint or not, and sometimes it becomes more of art than science. And one of the factors we often are looking at when we have that kind of gray area for if it's a complaint or a service issue, is really, if the client's just inquiring, are they posing just a question, like, 'Hey, what's going on in my account?' that by and in of itself wouldn't be considered a customer complaint. But again, if the client's adding additional context with that kind of question, like,'what's going into my account, this is not what we discussed.' That starts moving the needle to a customer complaint.
Debi Lucke:I would agree with that. Yeah, the tricky part with those is kind of saying, how what's the actual grievance? How far have they gone? Is it just a question? Is it an inquiry? Or do they really have a grievance or a concern about being treated unfairly or something like that?
Jarrett Jacobs:nieAbsolutely.
Connie Capco:When you have one that's kind of iffy. Do you, you know, do you go through process and maybe do a little more investigation? Do you kind of go through the same process or workflow to kind of evaluate it? Do you still go through the entire process no matter what it is?
Debi Lucke:I would say for us, if we're on the fence, we might just vet it internally a little bit, and if we decide to refer it back to the field RP, maybe they can make a call and see if there's something more going on that we're not seeing. But most of the time, we err on the side of caution, and if we're not entirely sure, we'll just kind of deem it a complaint and go from there.
Connie Capco:So, you know, I've always said that complaints come in different shapes and sizes. Sometimes they come in an email or a letter, and you know exactly what's being said, and then sometimes we get into verbal complaints. And Jarrett, when we had initially met about this, you made a very interesting comment, and I want to hear more about this, but let me ask the question, and we'll go from there. So if a client is complaining verbally, should the broker dealer have a requirement or procedure in place to put that complaint in writing, to memorialize awareness your of essentially? If it is transposed into a document, and this is where you you had said earlier Jarrett, you know that this, you had a very strong opinion about it. Is that complaint now reportable to FINRA?
Jarrett Jacobs:Yeah, life can be a very cruel teacher, and we definitely experienced an event that would be beneficial for many people to understand where the regulators can come from. So a few years ago, we had a securities regulator where we used to memorialize our verbal complaints. We even called them verbal inquiries to differentiate them from written complaints. And they saw that process during a normal examination, they determined that we were in violation of the rules for not reporting those as customer complaints through the 4530 process, and then ... Ultimately, we did win the arguments, but only after a prolonged, multi-month process with them. And during that whole process, that regulator conducted interviews with representatives; they pulled millions of email communications because we had a process that went beyond what the regulator required in our written policies. And so, you know, that's that's just as enforceable from a regulator perspective as if it was their own rules. So they started digging deep to see if we had unreported verbal inquiries or verbal complaints, and henceforth, the rapid interviews and pulling communications. So we spent a lot of resources in the defense of that practice. So we have, if you can't figure that out, we have stopped that practice. We have moved to training our representatives to escalate those verbal complaints up to their principal supervisor and work with their principal supervisor and compliance as appropriate, rather than memorialize them in a document.
Connie Capco:Debi, did you guys have a different perspective?
Debi Lucke:That's really, really interesting to hear how other people have dealt with that, or have had experience with regulators. Our process is pretty well defined. The field is fully aware that any verbal client complaint that they receive needs to be forwarded to my team, you know, in a summary of the concerns. We do open verbal complaint cases and treat them like written complaints. We just don't report them on 4530 D, because there's no requirement to, but we follow the same process. We send the client an acknowledgement of their verbal concern. We may talk to them about it, we research and review them, just like we would a written complaint and provide a response. So the only difference is we call one written and one verbal, and we don't consider transcriptions to be deemed then written complaints. We don't really transcribe things in the normal course, so a summary and an email wouldn't be considered then a written complaint, if it you know, came from the RP or the advisor. So that's sort of how we handle it.
Connie Capco:Do either of your firms have recorded lines for your brokers?
Debi Lucke:We do not record our field advisors calls, no
Connie Capco:.And Jarrett?ebi
Jarrett Jacobs:Just our trade desk. Our field representatives, no, they're not recorded.
Connie Capco:And I have one more question for you, Jarrett, given that your Fifth Third is a bank like Northern. It's got a bank front. Do you ever run into situations where it's kind of a, you have a shared client relationship, and it's kind of a complaint that's really not a broker complaint, but it's your client, and the banks have it. Do you ever run into situations like that? Get pulled into something that, not necessarily anything to do with the brokerage account, but it's a shared relationship?
Jarrett Jacobs:Absolutely, we definitely have instances like that where we might get the customer complaint. It's not ours. It's really our parent companies that they're banks, or we have the ones that get trickier, are the instances where you have overlap, where the client's complaining about something on the bank side and on the security side, and just coordinating that with our parent company sometimes can get a little tricky. You just need to dot the i's across the t's there, because now you're dealing not just, obviously, with security regulators. You're also dealing with, potentially, with banking regulators.
Connie Capco:It does get a little tricky to navigate. I agree. So when we're looking at a complaint and we're working the investigation, is it advisable for the broker dealer to call the client, or should all correspondence after the complaint is received be in writing?
Debi Lucke:I would say for us, whether it's verbal or written, as I referenced earlier, we do send an acknowledgement letter to the client, and we let them know who's assigned to their case and their phone number. So we do end up talking to clients a lot, most frequently because they'll call in rather for a status or just to share some more information that maybe they feel we don't have. We occasionally will call them if we're looking for additional context, but we don't have a requirement to call them, and all of our final communications, whether at the outcome, whether it's a denial or some form of resolution, are always memorialized in writing and sent to the client.
Connie Capco:We utilize it a letter as well. So Jarrett, anything different at Fifth Third?
Jarrett Jacobs:I would say, we don't initially notify the client right away that they received it, and we'll do that if we know that investigation will take a little bit of time. We do try to move through the customer complaint investigations quickly out of respect of our clients and their concerns, but we often will contact the client. It's just even that human touch in a world where so many things are automated and robo contact, having that personal touch. And again, I want to be very clear that what we're talking about is a principal supervisor or the compliance or some of them individual other than the representatives often doing those outbound calls to the client. And that adds, often, a lot of the context that's not put in writing around the situation. So it really helps us flush out what the core concerns of the clients are. And then, to Debi's point, like at the closure, the vast majority of our complaints are closed out with a written notification for the client.
Connie Capco:So as far as kind of maintaining, kind of a record internally of our complaints, how do you guys do it? What's your process in and around complaint management? Should operations be involved? Should they be responsible for responding and mitigating or should that entirely be kind of sequestered out in second line in the compliance department?
Jarrett Jacobs:I definitely believe it should reside in compliance. That doesn't mean we're the end all be all, but I always often put the analogy out there over that we're the quarterback right there to help coordinate the investigation and the handling of the customer complaint and what not. So we'll bring in other areas again, the principal supervisors, the other areas, like operations or middle office, etc, as appropriate in the customer complaint situation.
Debi Lucke:Yeah, totally agree withJarrett on tha. It belongs with the compliance department. Our team is handling primarily advisor, as subject type complaints or regulatory, you know, handing along the regulatory things that might come in from FINRA, the SEC for operational type issues that are firm related, you know, meaning a client has a concern with an... or how their account statement looks or something. Those are referred over to our service team, who does handle those and make those outreaches. However, we do set up cases for those and track them in our system, and my team is responsible for all the FINRA coding of those. So problem and product codes are done by us, because we're in a better spot to take a look at that and determine what's the correct code to report to FINRA. But we don't handle those specifically on team. Just from a volume standpoint, our service team is better suited to write those responses
Connie Capco:Understood. Do either of you have a vended solution, or how do you kind of maintain your your list, for lack of a better word, what you're currently working on?
Debi Lucke:We use an outside vendor, yeah, system for that that gets used across the firm, for a couple other functions as well.
Connie Capco:And Jarrett?
Jarrett Jacobs:Yeah we use an internal created database.
Connie Capco:I think every depending on the size of your firm, not everybody has a vendor solution. And unfortunately, sometimes this could be tracked on an Excel spreadsheet. I don't know how effective that is over year over year. At any rate, next question, how should the broker dealer construct key risk indicators, KRIs? Should they be measures of a claimed damage, amount paid out, amounts or should they be measures of the number of complaints received over a given period?
Debi Lucke:Yeah, for our care, I we look at our volumes every quarter and track those. We also show the data that comes from FINRA on the number of complaints that they that the industry reports to FINRA, that they're reporting, right? So we get that data, so we can kind of see, are we fluctuating and trending in line with what other firms in aggregate are reporting to FINRA? So that's really the primary comparison that we use. We do look at some other smaller things, just internally, but not as part of a KRI specifically.
Jarrett Jacobs:And we use KRIs, I think going back to the question, like, it's not one or the other. It's like ... was saying years ago, 'it's all the above.' We look at, obviously, number of complaints in totality, but we really hone in on, like, sales practice complaints, because that really, if you look at what costs the firm and its exposure from a regulatory perspective, sales practice complaints are going to be at top of the list. We look a lot when we build our care as we look at a lot of the sales practices, and definitely, like you said earlier in, the question, the amount paid out is obviously an indicator of maybe some process improvements or issues the firm has, or missteps by an associative person.
Connie Capco:I do have a follow on question in your experience and Debi or Jarrett, either of you can answer this question, is there like a time of year you see more of it? I mean, I think you know, summers and holidays, we might not see as much. But other than just the normal time of years where people are kind of more engaged, school has started or or even market volatility, do you see an uptick in complaints during any kind of particular event like that?
Debi Lucke:We look at all of that, obviously, all the time. Basically, we're always looking at that, I would say, from a fluctuation standpoint, clearly, tax time is one of the busier times. You know, you start to go into February, March, when tax information is being sent. We do tend to see a seasonal uptick then, which I think is probably pretty consistent with most people. But, yeah, you know, internally, again, the same thing we're always looking at that. We don't feel that we track too much to the market, because we always feel like there is a bit of a delay. We call it the time to complain. You know, it's people. You'll get some but we don't really get really big upticks when the market is moving, but that may lag several months after the fact.
Connie Capco:Very interesting. Jarrett, any thoughts on that?
Jarrett Jacobs:Yeah, I'm going to mirror what Debi said. It's definitely tax time like that, March, April timeframe. You see people paying attention a lot more to the finances, looking at the statements and any tax implications. I would say definitely market volatility might not align perfectly with exactly the event, but often when you can almost time it with these statements after a volatile time where, especially if we're talking like markets going down, and that next month or a quarter, when there's been a significant drop, you're going to expect an increase in customer complaints.
Connie Capco:So the last one, last question, and it's more about analysis to kind of, you know, get an overall perspective on complaints. So what type of analysis should a broker dealer be doing on a routine basis to assess ... casually to client complaints? Should they be looking to whether complaints are centric on one particular product or one particular rep, or registered rep or a particular location?
Jarrett Jacobs:For us, I mean, we have you already mentioned this, but FINRA's quarterly complaints. Statistics are key, right? We've analyzed those data in the industry. What's going on in the industry? The reports, by representative, by production or revenue of the firm, are really critical to keeping pulse of how the firm is doing against the rest of the industry.
Debi Lucke:Yeah, I would just say to follow on to what Jarrett said. I mean, yes, we, besides KRIs and things like I said earlier, we are looking at a lot of different things. We do look and generate some reporting before we do our 4530 submission, to see, are there any product or problem codes that we're spiking in that we're going to report, you know, higher volumes and we might look at that. So we do look at a lot of those different kinds of metrics internally amongst ourselves, and deal with them as needed, but we don't see a lot of really wild trends on our side. It tends to be pretty level with the same issues and products and things like that.
Connie Capco:Can you leverage, you see the exam priorities, the annual exam priorities put out by FINRA and the SEC to kind of practically identify future hot hot topics?
Debi Lucke:Yeah, we do. Every time FINRA puts our exam priorities out, we gather together and look at those. When the SEC does theirs, we look at those as well, just to make sure that we're ahead of the game and are already have a focus on some of the things that they're looking at as well. So that's a very important thing for us to follow along on.
Connie Capco:And do you subsequently, maybe go and check your policies and procedures to see if there's anything you need to update?
Debi Lucke:We would if we felt that, that, you know, we had to. I think my recent experience is that we've pretty much been in a good spot. When those exam priorities come out, it's things that we've already got on our radar screen, um, you know, and, but then there's other things, like off channel communication, right? That was a hot topic, and, and so, you know, everybody was looking at that and but it's a great tool for us, just to get ahead.
Connie Capco:Jarrett, any thoughts from Fifth Third?
Jarrett Jacobs:Again, yeah, we look at the exam priorities. But one of the things, I think, going back to the earlier part too, about the products, one thing that we make sure is individuals who handle our customer complaints are really keyed in with any new products or services that we're offering so that they can have a pulse again of what's going on, and because we want to really closely analyze those first customer complaints about any new product or service to see if there is any needed changes in our processes or disclosures or sales practices, etc.
Connie Capco:Thank you both for joining us on this informative conversation. I hope our listeners found it beneficial and that it leads to further conversations at your forums are with us the next time we meet, please consider sharing this with your networks if you found it valuable again. Thank you to Debi and Jarrett for joining. Have a great day, everyone.