Diana Clement: Why your records may need a makeover

Some people save documents by scanning them on their PC - or storing them 'in the cloud'. Photo / Thinkstock

It pays to keep your financial documents organised. Poor record-keeping comes back to bite people. Even if they know they should keep financial documents, some people suffer organisational paralysis. They either throw out the documents they need to keep, or their filing system needs an extreme makeover.

I could have filled several pages of this newspaper discussing what documents people should keep, why and how. Even emails, Facebook entries and texts need to be kept sometimes.

The classic case in recent years where keeping paperwork paid off involved the ANZ Bank, which encouraged elderly and conservative investors to invest in risky funds managed by its subsidiary, ING. When the investments went awry, a small number of investors were able to produce documentation that showed the ANZ had promoted the investments as low-risk and akin to term deposits.

It's worth keeping every communication with a financial adviser or anyone else offering advice related to your assets, such as a real estate agent. Many cases have gone to the Real Estate Agents Authority where having communications in writing has worked in the complainant's favour. Conversely, good record-keeping can help you raise money from a lender, if need be.

Having a system for paperwork is really important. That could be simply suspension files in a filing cabinet, lever arch files and so on.

Some people prefer to tame the paper tiger - I've heard of people scanning all paperwork, shredding the original documents, and keeping the electronic copies in online repositories. Document management software such as PaperPort or Zoho Docs is designed to help store and retrieve documents kept this way. I find Microsoft OneNote works well for this, because it allows you to save all manner of documents, including photographs and voice recordings, in one folder.

Keeping backups of important paperwork away from home on a hard drive, in a safe-deposit box, or "in the cloud" online makes sense. Just imagine the poor apartment-dwellers in Christchurch's red zone. Some of them will have lost all of their paperwork and computers when they were evacuated from their homes following the February earthquake.

Websites such as Box.net, ADrive.com and SpiderOak.com offer free services to personal users who have a limited amount of data to store.

These days, electronically stored documents such as emails can be given as evidence in court, determined by the judicial officer who presides over a hearing. Text messages can be downloaded and used in the Tenancy Tribunal. The courts will inevitably struggle to keep up with new technology. Electronic filing systems don't work for everyone. There is a very good paper-based system explained on The Simple Dollar website that can be found at http://tinyurl.com/2en7l9.

Whatever the type of document, its existence may be able to solve a dispute at some point in the future.

Keeping records of verbal conversations related to finances is also important. That might be notes from a quick call to the insurance company to let it know your situation has changed - such as letting a room of your house to a boarder, or your 17-year-old son using the family car.

It's rare that the insurance company will send you written confirmation of the conversation. Noting the date, time and staff member's name, as well as the information discussed, could prove useful if you later have a claim declined.

The Insurance & Savings Ombudsman (ISO), which hears complaints about insurance claims and financial advisers who belong to its scheme, advises keeping all contractual documents such as insurance policies and all communication relating to advice given by financial advisers.

In theory, consumers could have complaints about omissions of advice given by financial advisers, not just for bad advice.

"[Consumers] should keep all those communications that indicated people said X, Y or Z," says Louise Peters, legal and financial adviser complaints manager at the ISO. "We get a lot of 'he said, she said'."

Likewise, the Banking Ombudsman, who dealt with many of the ANZ/ING complaints, recommends keeping more than just contractual documents and always asking for confirmation of conversations in writing. The Banking Ombudsman's advice includes:

* Keeping all letters from banks relating to your business.

* Keeping both paper and email correspondence.

* Noting the date and what has been said over telephone.

* Recording what decisions were made and what you understood from telephone conversations.

Taking notes from conversations can be useful in all areas of personal finances, not just insurance and banking. These conversations may be with financial advisers, siblings, business partners, or real estate agents. It's easy enough to type a quick note of the conversation, email it to the other party and print out a copy of the email for filing. If there is any misunderstanding, the other party can reply and sort it out.

Where a lack of communication and recording intentions often go wrong is over a family member's will. Perhaps one beneficiary received large amounts of cash towards a business or house during his or her lifetime and the other beneficiaries understood that it would be deducted from that person's share of the estate. Had these assumptions been jotted down in a letter or email when they were made, a family squabble could be avoided.

It is possible to record telephone conversations involving yourself as one party using Skype or Android and iPhone applications. Most mobile phones also have voice recorders, which enable face-to-face conversations to be recorded, downloaded and saved. Recording each and every conversation about your money might just be a tad over the top, however. That's almost willing the relationship to go wrong.

It is always worth keeping receipts for just about anything you buy. There's nothing like having original receipts, bank and credit card statements, or recent valuations in writing to prove ownership for an insurance claim.

Other documents that can be useful to keep include warranties and utilities bills.

Where a good filing system pays for itself is when the Inland Revenue Department (IRD) comes calling. Gore dentist Ian Bloxham was given home detention this year for tax evasion and fraud. Bloxham made matters worse for himself by not forwarding financial records to the IRD when asked and "keeping substantially incomplete financial records", according to IRD investigations manager Lynley Sutherland.

The IRD says non-business taxpayers, who hold investments such as shares or bank deposits and are required to file a return of income, are required to retain the information pertaining to those investments, such as tax deduction certificates from banks or dividend notices, for 12 months after the end of the tax year in which the investment income was received. The IRD can still ask for your documents after this time if you have filed a fraudulent return.

It can be very expensive when the IRD's inspectors come calling. It's not unusual to spend thousands of dollars on accountancy services to get through an audit. The more ordered paperwork you have, the less painful the experience will be.

On the cheerier side, keeping receipts for charitable donations makes a lot of sense, because a portion of the donation can be claimed back from the IRD. There is one piece of paperwork that should never be kept. That's anything with your PIN numbers written on it. If you do, and money is stolen from your accounts or credit cards, you're unlikely to be reimbursed.