No one likes being overbilled for a product or service, whether you’re talking about something as small as using a coupon code or as large as managing your investments.
When the overbilling involves services provided to advisory clients, the consequences can go far beyond frustration from the customer. Overbilling is sure to attract the attention of regulators and can land you and your firm in some hot water.
At the same time, overbilling is rarely a malicious issue. Instead, it can be an unintentional error that arises from growth or from a firm staying busy with the business of running day-to-day operations.
This role as a trusted adviser includes a responsibility to ensure processes are in place to prevent accidental harm to a client. Accidentally billing clients, although obviously not intentional nor malicious, will result in regulatory issues.
If overbillings are not discovered, and billing issues continue over a period of multiple billing cycles, regulators are likely to take action. For example, a North Carolina adviser who consistently overbilled was fined more than $500,000 and required to bill only under supervision for a period of three years.
What are you offering or promising in your manual, and how closely are you sticking to the guidelines you’ve put in place?
Many manuals contain language indicating that the adviser will conduct quarterly audits to ensure fees are being billed accurately. However, experience indicates most advisers do not regularly audit their fee calculations on a regular basis. Consider auditing your efforts and tracking your documentation to ensure you’re following the steps you’ve outlined in your manual.
Overbilling issues seem to frequently arise from a lack of time to ensure processes are managed properly. To protect your clients from overbilling and your firm from regulatory exposure, focus on ways to make more bandwidth available to your compliance teams and increase the effectiveness of your efforts keeping your firm in line with regulatory guidelines.