Service level agreements

By Lee Rossini

A service level agreement (SLA) is a commitment made by a financial advice business to a client regarding the level of service as agreed to by both the parties. The agreement spells out what services the client has chosen from the menu of services on offer. Although an SLA is not required by law, it is in the best interests of both parties to document what has been agreed to. 

Some of the reasons for entering into an SLA with new clients are:

• The SLA is an important means of communicating with a new client.
• An SLA is seldom required until there is a disagreement or conflict between the client and the business. At this time, a well-drafted SLA provides clarity on the issues and can prevent a dispute from escalating and leading to high and unnecessary costs.
• It can be challenging to remember all that was agreed to with a client, particularly when the first appointment took place months or years previously. A written SLA is an important reminder of what was originally agreed to.
• An SLA can also be used to spell out the responsibilities and undertakings of clients.

What should an SLA contain?

The agreement should clearly define the scope of services that can be expected in plain language, the pricing model, method of payment and time frames for delivery (including the need for a review process). It can include performance levels, especially reliability and responsiveness. The agreement should include a monitoring process and service level reporting. The agreement should provide the client with options to report their dissatisfaction with the service and how issues will be resolved.  It should also cover other important aspects of the relationship such as confidentiality and what will take place in the event of termination of the relationship.

An SLA should be simple, easy to understand and appropriate to the business.  It should be drafted in a manner which suits the service model used by the business. The SLA should cover the required standard information (including the regulatory requirements, for example, the necessary disclosures) and where appropriate, it should be customised to suit the individual needs of a new client. After the client has read through the SLA and agreed to it, the document should be signed by both parties. A copy should be given to the client and the original should be kept in the client file.

Most importantly, an SLA provides a basis for the client and the business to judge the effective and efficient delivery of the services promised. It ensures that both parties use the same criteria to evaluate the quality of services. This assists in limiting unrealistic expectations and future complaints by clients. For this reason, the SLA should be realistic in terms of the types of services a business is able to provide. If a business offers more in an SLA than it can deliver, it opens the possibility of future conflict.

An SLA provides clarity and certainty. It spells out how the relationship between a financial advice business and a client will unfold and take place effectively and efficiently in the future. An agreement also offers the financial advisor a form of protection and in the current environment of intense regulation, this could be extremely useful in the case of a dispute.