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 Tags: Regulations

Summary: It is time to stop viewing compliance as a roadblock. Most wealth management firms and individual financial advisors view compliance as a necessary evil. Unfortunately, that mindset is holding the industry back while many new market entrants are cleaning up.

Traditionally, the job of a compliance officer is to protect the firm and its financial professionals from regulatory trouble. However, as the wealth management industry evolves smart business leaders are leaning on compliance to help them innovate and thrive in new market conditions.

Compliance Is Not The Enemy Of Progress, It’s The Facilitator

It is time to change the way you think of compliance. I want you to stop thinking of your compliance folks as “Chief No Officers” or as a necessary evil.

In fact, I’ll take it a step further. I want you to stop viewing your compliance team as a cost center. I want you to start thinking of compliance as a team of business strategists.

Why? Because without an innovative compliance team at your side there is no way your firm succeeds in the future.

Yes, Compliance Can Help You Innovate

In most organizations the compliance team has more in common with operations than they do with the teams charged with making strategic business decisions. Their days are filled with a seemingly never ending stream of trades, marketing materials, and regulatory filings to review to make sure the regulators don’t come knocking. They have to move quickly and accurately so the business can operate smoothly.

But what if, instead of viewing compliance as an operations team with veto power, you treated them as industry experts with deep insights into the rules and mechanisms for constructing a winning business?

This practice is common in other industries. In professional sports most teams employ a capologist. These are professionals who know the ins and outs of the salary cap rules. Their guidance is leaned on heavily not just to make sure the team complies with the salary cap but because these experts are crucial to constructing a winner roster.

In our industry we see new RIAs like Ritholtz Wealth Management growing much faster than many of their peers because they embraced new media when others were afraid to move. And we see new brokerages like Robinhood and robo-advisors like Betterment leverage mobile to acquire new clients at incredible speed. Each of these rapidly growing firms leaned into compliance aggressively to pursue innovative business models and marketing approaches. Had they simply seen compliance as the Office Of No they would have never been bold enough to move forward.

How To Get The Most Out Of Your Compliance Team

Whether you have an in-house compliance team or you use an outsourced firm, like Red Oak Compliance, it is important that you set expectations and lay out what you want to achieve as a business. Remember, compliance is there to serve the business not hold the business back. Sure, they have a duty to protect the firm and they can’t help you violate regulations but that’s a shared goal for every reputable wealth management firm and their financial advisors.

Below are a few recommended conversations to have with your compliance team to empower them to think strategically about the business:

What’s your perspective?

“You know the rules better than anyone else. How can we move faster and more efficiently in our client acquisition process?”

This line of questioning will encourage your compliance team to think beyond the day to day process and explore what is possible.

What are we missing?

“What are you seeing others in the industry doing that we should consider? What are our competitors ignoring out of fear or lack of regulatory clarity?”

The most dangerous thing for any business is to become complacent or fearful of change. Think about how much the wealth management industry has changed in the past two decades. By asking compliance to look outside the firm for ideas you force them to explore new opportunities for growth and consider emerging threats to the business.

How can we do this?

“How can take advantage of this new technology for marketing? How can I encourage clients to recommend us on Facebook without it being considered a testimonial? We can’t? Why not? If you had to do it, how would you do it?”

Asking “how” immediately sets the brain in action to look for a solution. This is much better than asking a binary “Can we?” question where the likely response is “No”.

The Goal For Compliance

“Keep the firm safe and help us innovate.”

Safety and innovation are not compatible. Think of how many innovations have arisen in the auto industry out of the pursuit of safety. Today you can’t buy a car that doesn’t have hands free calling built in or a rearview camera for parking assistance. Many of those innovations were driven (no pun intended) by a combination of regulatory requirements to make cars safer and the automakers desire to sell cars with cool features that made driving more enjoyable.

The same is true for the wealth management industry. Consumers want to be able to do things like open accounts via their phone or chat with their advisor via text or Facebook Messenger. Compliance has a role in making those things possible and ensuring they are safe for the firm from a regulatory perspective.

Done Right, Compliance Can Make Your Business More Valuable

The value of your business is directly proportional to its long-term viability. Compliance should make sure everything is clean and buttoned up and they also should be working with you hand-in-hand to ensure the future of the business is secure by helping you innovate. Schedule a meeting with your compliance team today and let them know you would like to expand their role.

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Disclaimer

The above article is meant for information purposes only and is not intended in any way to provide legal or other advice for any specific situation.  Readers always should consult their own tax, accounting and legal advisors before taking any action related to the above article or subject matter.

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