Published by Dan Tobin
Growing up, it was the 4-letter words that were bound to get you in trouble. Those forbidden words beginning with D or F or S were uttered in a moment of adolescent bravery and immediately met with a mouth full of soap. The punishment was harsh, but it taught a valuable lesson: actions have consequences.
Decades later, it’s a 10-letter word that seems to scare many in the advisory business.
Need a hint? It begins with a C.
If Dial soap seemed severe, the aftermath of not being in COMPLIANCE can leave advisors with huge fines, damaged reputations, drawn-out lawsuits and permanent loss of business. These potential outcomes aren’t just a symbolic “cleansing.” They are very real, very serious effects of the action or inaction an advisor takes. And, let me tell you, they leave a far worse after taste.
Achieving the much-sought end result of being compliant begins with creating a positive culture of compliance in your firm. Easier said than done, instituting a culture of compliance involves first getting rid of the idea that compliance is anti-sales and then building supportive relationships between various departments. To help you begin, here are five tips Carson Group has used to strengthen our compliance culture as we’ve grown from a few Partner firms to over 70.
Start from the Top
You probably don’t need me to tell you that leadership plays a crucial role in the whole firm’s perception of compliance. If the CEO views compliance as an adversary, other stakeholders are likely to mimic this “out to getcha” mentality. Equally as damaging, if compliance is consistently put on the back burner by the lead advisor, the rest of the team will deem compliance tasks as unimportant, too.
Instead, leadership needs to adopt the attitude that compliance is their Business Continuation Department. As such, a CEO’s function is to be the role model when it comes to responsiveness and receptiveness. This includes taking action in a timely manner, accepting when the rewards don’t outweigh the risks and getting requirements done the first time they are asked. The comradery between leadership and compliance will then set an example for other departments and associates to follow.
I ranked this first because it is the most important factor in my opinion. I would not have accepted the position of Chief Compliance Officer for Carson Wealth Management, LLC if it were not for Ron Carson and his positive attitude towards compliance. There are times when Ron and I discuss a decision that needs to be made, and I have to tell Ron no. Despite occasionally not seeing eye-to-eye on a particular topic, the discussions we have – emphasis on discussion – are always evidence of our mutual respect. His backing is absolutely key to the success of my team.
Hire a Full-Time Compliance Associate
Even in small firms, it’s vital to have one person dedicated full-time to compliance. Not only is it impossible for the lead advisor to find the time to meet with clients, serve as a rainmaker and perform necessary regulatory functions, it can also be a significant conflict of interest. Hiring a compliance consultant is a good temporary solution, but because they aren’t ingrained in the day-to-day of your business, this shouldn’t be your only solution.
When putting together your compliance team, pay attention to complementary personalities and skillsets. You want to employ compliance professionals who work well under pressure, who demonstrate sound judgement, who possess the ability to communicate rules and regulations while still holding their ground and who show attention to detail with problem solving skills. Don’t overlook other traits, such as their ability to get along with others, as compliance analysts will need to interact with stakeholders at all levels. You’ll know you’ve found “the one” when the candidate is the perfect combination of problem-solver, people-person and confident enough to “put their foot down” when needed.
Develop Relationships between Teams
If you haven’t gotten the message by now, compliance is a two-way street. There are several ways you can ensure healthy relationships develop between compliance and other departments without forced closeness.
As Carson Group’s CCO, I participate in at least two meetings each week in which all Executives are present. One of these is dedicated solely to risk management. The facetime I get with other department heads makes it possible for compliance to have a voice and for others to weigh in and ask questions. Additionally, my concerns or immediate needs get passed on when those leaders return to their teams.
Regardless of the size of the firm, this same give and take can occur. Allow your compliance officer the opportunity to present and to answer questions at each all-team meeting. If you send a weekly/monthly internal newsletter, dedicate a section to what’s happening in compliance. Trust should develop naturally as long as you give compliance a seat at the table, rather than in the corner.
Encourage Continuing Education
The ins and outs of the financial industry are difficult to keep up with. In particular, those whose career paths began elsewhere can have a steep learning curve once they’ve entered our strict regulatory environment. Carson Group’s marketing team, for example, has members that were formerly a teacher, a PR consultant for casinos, a graphic designer at an architectural firm and a membership director at a non-profit. Stakeholders such as these rely on the compliance department to get them up-to-speed on the rules that pertain to their roles.
If feasible, have new employees sit down with compliance as part of their orientation. This one-on-one training will be extremely valuable and help establish rapport early on. Other ways to promote continuing compliance education are:
- When saying “no” or requesting a change, go the extra mile and provide the reasoning behind it
- Urge your staff to subscribe to publications which provide industry insights
- Share webinars or online training which review regulatory changes
- Encourage stakeholders to proactively ask the compliance department for feedback or help
- Implement a structure so that each branch or office has a dedicated contact in the compliance department
Invest in Technology
Staying on top of written supervisory procedures can become a vacuum, sucking up all your time and energy. With or without technology, you need procedures or workflows in place to abide by the rules and regulations for various compliance topics, including but not limited to advertising, email archiving, personal transactions, personal accounts, OBAs, designations, etc. As your firm continues to grow, however, the need for additional compliance stakeholders will compound exponentially if not using the proper technology to assist with the demands of remaining compliant.
Carson Group has built workflows within operations that are designed to do exactly that. In other words, our advisors are processing business through the CRM system and may not even realize they are being compliant at the same time. This is a win for everyone. Additionally, we have implemented processes within our back-office system for advisors to file advertising, OBAs, annual questionnaires, personal securities transactions/personal account reporting, professional designations and many other compliance-related tasks, which are submitted electronically. This creates efficiencies that help drive consistency and capacity as we approach each new phase of growth.
The world of compliance doesn’t have to be something you fear. After all, we chose this profession knowing it would require us to uphold a fiduciary standard. That knowledge and acceptance means we owe it to our clients and stakeholders to maintain a positive attitude amongst leadership and a positive culture of compliance within the firm. Doing this can turn compliance into your competitive advantage.