A small firm's close client relationships only count once they are written down

In Plato's Phaedrus, Socrates tells a story about the Egyptian god Theuth, who brings the invention of writing to King Thamus and offers it as a remedy for memory. Thamus is unconvinced. Writing, he says, will produce forgetfulness in those who learn it, because they will trust external marks instead of remembering for themselves. For a couple of thousand years, the anxiety about records has tended to run in that direction.

In a small advice firm it now runs the other way. For as long as I have been in this industry, the small firm's answer to the larger one has been the same: we know our clients. We know who has just lost a parent, who worries about money more than their numbers suggest and who needs a drawdown decision explained twice, slowly, with a spouse in the room. That knowledge is genuine, and it is valuable.

It also tends to live in one place. The adviser carries it, and the file carries a fraction. For most of the history of independent advice that was enough, because the file was there to evidence the recommendation and the relationship was something the firm simply had.

Consumer Duty altered the terms in July 2023. Two of its four outcomes, consumer understanding and consumer support, are directly about how the firm deals with its clients, and the firm is expected to show how it meets them. The evidence that follows is unglamorous: how quickly queries are answered, whether key documents were understood, what adaptations followed a vulnerability indicator and whether reviews happened when the client was told they would. Almost none of it is captured by knowing a client well.

This is where the long-held advantage becomes awkward. The sincerity is real. It simply isn't auditable. A firm that knows its clients intimately but records little of what it knows looks, on paper, much like one that barely knows them at all.

The supervisory point is only half of it, and for a practice owner probably the smaller half. What sits in an adviser's head is equally invisible to the colleague covering a fortnight's holiday, to the paraplanner drafting the next report and to whoever takes on the client when the adviser retires or the firm changes hands. A great deal of what gives a small firm its value, the trust built over years of reviews and telephone calls, is at risk of leaving through the door with the person who holds it.

None of this calls for the relationship to become bureaucratic. The useful discipline is narrow. After a client conversation, the observation that would matter to someone else goes into the record in plain words: the change in health, the confusion over a charge, the preference to deal through a daughter. It takes a minute. Over a year, it becomes the firm's memory rather than one person's.

The measurable parts follow more easily once that habit exists. A service schedule that the system enforces, instead of one that sits in a document on the shared drive and drifts away from real practice, lets the firm say whether reviews happened on time. Response times can be read from the same records. Vulnerability assessments can be counted, and so can the adaptations that followed them.

Firms with a few hundred clients sometimes feel this is apparatus built for larger businesses. I understand the instinct, and the scale should match the firm. But the smaller the firm, the more of its knowledge sits with fewer people, and the more exposed it is when one of them is unavailable.

Thamus feared that writing would hollow out memory. The small advice firm has the opposite exposure. Its memory is excellent, and almost none of it is on paper.