It is no secret that compliance can get complicated for financial advisors. In the last few years, confusion regarding the DOL Fiduciary rule and additional changes in SEC regulations has forced firms to reassess some of their most basic processes and operations. According to the RIA Sentiment Survey released by TD Ameritrade, 30% of RIAs consider compliance and regulatory issues to be their biggest challenge in 2019.[1] Compliance violations can be costly, time consuming, and damaging to a firm’s reputation, so new rules and regulations should be taken seriously.

There are a couple of things that you can do to ensure your firm’s safety and productivity in response to these changes. One comprehensive approach is to perform an annual compliance audit. Organizations such as the Centre for Fiduciary Excellence (CEFEX) provide an audit system to analyze your firm in accordance with fiduciary standards.  A CEFEX certification also solidifies trust in your client relationships.

In order to stay up-to-date on rules and regulations, financial advisors should be constantly aware of new information on the SEC website, specifically on their “Risk Updates” page. Subscribing to the email list of risk updates will help keep you and your firm educated about any upcoming changes going on with the SEC.

Leveraging technology can be another way to implement necessary compliance changes efficiently and effectively. For example, the new SEC Form CRS contains a mandatory relationship summary that must be delivered to clients. One way to streamline this process is to integrate it into your Client Relationship Management (CRM). This would allow you to easily send out the Form CRS to clients efficiently while also creating an archived paper trail of your communications.

Another area that advisors should approach with caution is social media. Though social media is a useful channel for promoting your business and ideas, your social media posts must be well-thought out and compliant with FINRA regulations. “I’ve been flagged three times (for tweeting) by FINRA, and have had to pay a fine,” says Jon Ten Haagen from Ten Haagen Financial Group.[2] This proves how. For instance, one might tweet a hyperlink to an article of information, but underneath that post, your firm is responsible for the validity of information being presented in the article. The rules of social media platforms change quickly, so financial advisors must stay updated upon what their firms can and cannot post.

 

References

  1. “DOL Fiduciary Rule: Survey on Financial Advisor Sentiment.” DOL Fiduciary Rule: Survey on Financial Advisor Sentiment | Aite Group, Aite Group, 2017, aitegroup.com/report/dol-fiduciary-rule-survey-financial-advisor-sentiment.
  2. Kuhn, Daniel. “Social Media Alert: How to Remain Compliant.” Financial Planning, 12 Apr. 2019, www.financial-planning.com/list/finras-social-media-alert-for-financial-advisors.