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ThitareeSarmkasat

Leveraging compliance to grow your assets

Tech frees advisors to focus on building successful practices

Our industry has seen a wave of compliance regulations in the last few years, often described as a tsunami. While the client-focused reforms (CFRs), considered to be the most significant wealth reform in decades, have added to the list of compliance challenges that advisors and firms face, they can also be leveraged for business growth.

Compliance has historically been considered a check-the-box activity where the industry performs the minimum required activities to remain compliant. With the CFRs and other best-interest regulatory reforms in the U.S. and U.K., industry leaders recognize a new opportunity to use compliance to grow assets with existing and new clients.

The CFRs’ goals are fairly simple: to address material conflicts of interest in the best interest of the client, to put the client’s best interest first and to clarify what clients should expect from their advisors. If these regulatory intentions are met, the CFRs should be great for clients and ultimately great for advisors.

Most recent wealth regulations in Canada have focused on increased client disclosure, including Point of Sale (POS3), which requires the delivery and disclosure of a Fund Fact document at or prior to the sale of an investment product; the Client Relationship Model (CRM2), which focuses on disclosing the fees investors pay for financial advice; and, now, the CFRs. I noted in a previous IE article that disclosure is one of the hallmarks of close relationships and can be a powerful relationship building tool.

In a recent straw poll with leading advisors and compliance leaders, we asked, “Is there a correlation between good compliance and long-term industry success for advisors?” Not surprisingly, feedback indicated a strong correlation, with comments about how it would be “impossible” to have one without the other, and that the most successful advisors are also the most compliant “simply because they play by all the rules and have a loyal customer base as a result.”

If a strong correlation exists between compliance and long-term success, why is compliance often considered a necessary evil?

We believe it comes down to one factor: time. When advisors and firms use paper-based and analog methods to meet compliance, the time devoted to working with clients diminishes.

In last year’s J.D. Power and Associates survey of U.S. advisors, those who were the least satisfied with their firms cited technology and operations support as the most significant pain points. Efficient technology that automates key compliance activities on a digital platform offers a clear solution.

For advisors, the opportunity to elevate compliance from a table stakes requirement to an asset growth strategy is compelling. For wealth firms, removing time barriers to enable more client interaction will be an increasingly critical success factor for advisor retention.

Source: Investment Executive