An engagement letter is part of best practices when you’re on a first contact appointment or the front end of the discovery process. An engagement letter basically outlines what the adviser and client will do. Sometimes it addresses items the adviser won’t do. It’s part of the defensive posture to identify the rules of the relationship between adviser and client, especially for new relationships. That being said, an adviser should create an engagement letter for existing clients as well during their annual review.
There are several online examples of an engagement letters that you can modify for your practice. But you’ll need to have your broker/dealer compliance department approve it since it is a form of communication. Even if you’re not security licensed, you may want your general agent and/or independent marketing organization to review it. Make sure your engagement rules are doable. Afterall you wrote them and in litigation your feet held to the fire for promises you outlined in the engagement letter.
An engagement letter is great consumer contact piece that summarizes your course of action. Many financial advisers and insurance professionals don’t use it, but perhaps they should. It may very well keep you out of hot water.