With compliance regulations shifting and fees increasing (the SEC reported a 7% increase in enforcement actions in 2021), it’s never been more important for wealth management firms to instill a culture of compliance.
Whether your firm is large enough to employ a dedicated chief compliance officer or only has a handful of employees, prioritizing compliance offers many benefits, including lower regulatory fees, fewer infractions, and a reputation for integrity.
What is a culture of compliance? It means making compliance a hallmark of your firm, not an afterthought. It means training all advisors and employees to understand the definition of compliance and its impact on their daily actions. And it means fostering an environment where employees aren’t tempted to cut regulatory corners, no matter how small or unintentional they may be.
Here are three ways to create a culture of compliance:
Keep Advisors Up to Date on Changing Regulations
A culture of compliance starts at the top with leaders who understand the importance of following regulations and providing ethical services. But that mindset isn’t effective if it isn’t disseminated to all advisors and employees through regular training.
Regulations are constantly changing, and it can be challenging for advisors and back office employees to keep up amid their other responsibilities. Regular employee training on regulatory updates, either through dedicated quarterly training or short updates at all-hands meetings, ensures everyone is up to date on compliance standards.
Talking about compliance and making it a filter for decisions in every function of your business integrates compliance into your firm’s daily activities and the minds of your employees.
A training needs assessment can help you identify your firm’s highest risk areas. Compliance is complex, with many potential topics for compliance training to cover. A wealth management firm for high-net-worth individuals will likely have different compliance challenges than an RIA firm focused on small businesses.
Understanding previous compliance concerns and the issues most at stake in your firm can guide training to focus on the most relevant areas.
Leverage Technology to Automate Compliance
Technology opens doors to new compliance issues but is also useful for scaling and automating compliance efforts. Even with comprehensive and regular training, mistakes can happen. Supporting compliance efforts with technology helps advisors follow through with their best intentions.
Investing in compliance-enabling technology also shows employees how much the firm values compliance. Firms can make maintaining compliance easier for everyone by providing advisors and employees the right tools.
Compliance technology, or regtech, enables employees to process and store firm and client data efficiently and correctly. With increased numbers of advisors and employees working remotely, it has become especially important to ensure everyone has access to the correct information and that it is stored and accessed properly.
Platforms like Docupace automate document storage and processes and integrate compliance protocols to automatically raise red flags and ensure all regulations are followed.
Create Clear Compliance Protocols
In a culture of compliance, employees not only know what it means to be compliant but also what to do when they see a breach in compliance.
Although one person may be in charge of compliance efforts, the firm should delegate reporting responsibility to everyone. Shared compliance accountability requires creating a clear reporting structure and providing ways for employees to comfortably report concerns.
Thomson Reuters put it this way: “In the wake of unprecedented regulatory reform and compliance overhauls, financial firm leadership must adjust its perspective and view individual employees as their most valuable resources in the detection of criminal behavior.”
One of the biggest compliance risks for firms isn’t employees overtly breaking the rules but instead becoming complacent. Overlooking seemingly minor issues can lead to major compliance oversights and a general lack of regulatory integrity. A safe environment where compliance is expected encourages employees to stay vigilant instead of becoming careless.
Many firms create compliance plans or processes but don’t share them with employees. The most effective processes involve all employees and are regularly re-evaluated and updated as regulations and firm needs change. Regular compliance audits and reassessments of your firm’s reporting plans will help you develop current, employee-supported compliance procedures.
All firms today need to create and foster a culture of compliance. By empowering employees with training, technology, and processes, compliance can become the foundation of your firm.
