Speaking to clients about the risk posed by hackers and security breaches is never an easy conversation. When trying to reassure clients that their money is safe, it seems counterintuitive to focus on all the things that could go wrong.

However, strengthening the client relationship means being as transparent as possible with the benefits and risks inherent to the financial industry. Knowing how to broach the sensitive subject of risk management is an important skill, particularly if you want to compete in an increasingly digital (and, therefore, digitally dangerous) industry. Here are three strategies to use when explaining the importance of risk management to clients.

Don’t Downplay Risks To Clients

Mitigating financial risk is a complex subject many spend years learning about. When having conversations with clients, though, address the real concerns most clients have when entrusting their money to a third party. Approaching discussions about risk management through an empathetic lens can reassure clients that you care enough about their financial well-being and understand where they’re coming from. It also sets the foundation for an honest working relationship that can help you make the most beneficial decisions for your clients.

Avoid jargon and invite clients to be active partners in investment decisions. Using clear and concise terminology to describe your firm’s approach to risk management also helps clients recognize its importance. It can also empower clients to understand — at least, on a high level — how their information is protected and any general procedures in place for minimizing risk.

Technical, real-world examples can help showcase your firm’s risk management policies. Relying on Docupace to exemplify how data remains secure and investments remain legally and ethically compliant is one strategy for educating clients on the topic. Overall, the most important thing is to start with the basics: if you were in your clients’ shoes, what would you want to know about how your information will be kept safe?

Focus On Your Clients’ Needs

Another way to organically include risk management in client conversations is by infusing it into the portfolio planning process. Before recommending investment options, understand clients’ preferences and long-term goals.

Some common questions to ask clients include:

• How would you like your financial situation to look within the next 5 years? 20 years?
• What kinds of companies/organizations would you like to buy shares in? Do you value environmental sustainability? Consistent stability in the market?
• How comfortable are you with taking investment risks?
• What are your plans for retirement? What kind of monthly income do you want available after you retire?

As part of the same discussion, advisors can tie in risk management with their investment recommendations. Based on client answers, tailor risk management discussions toward topics and threats pertinent to each person. Being transparent with this strategy will build client/advisor rapport and mutual trust.

Establish Processes And Platforms For Addressing Security Risks

Discussing risk management with your clients isn’t effective if you don’t have the time or resources to properly secure their information. Investing in technological solutions that identify, remediate, and document risk gives advisors more time to provide personalized investment advice.

Involving clients in building out a comprehensive risk management plan can help them see how the right platforms and processes mitigate risk. Knowing who is accountable can reassure hesitant clients that you have an actionable plan for addressing any threats that may arise.

No risk management plan is perfect. However, informing clients about the dangers that can get through even the most robust security system provides them some agency in the level of risk they feel comfortable with. Tools like Docupace can serve as a further barrier against threats and reassure clients that automated risk assessment is happening behind the scenes at all times. When it comes to risk management, transparency with clients is far better than downplaying the dangerous truth.

For more information on how Docupace can support your risk management strategy, please contact us for a discovery call here.

Help Clients Understand Risk Management

Build trust and transparency by discussing security risks and how your firm mitigates them.

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Just as the economy changes, so too does regulatory compliance. Just as a firm gets comfortable with a new set of rules, updates change things. And that will be especially true in the coming years.

In 2022, the SEC proposed 33 new rules — a significant increase from the nine proposals in 2021 and 11 in 2020. Only a handful of those new regulations have been finalized, meaning the industry will likely see significant change over the coming year as new rules hit the books.

These regulatory changes hit amid market uncertainty, increasing cybersecurity attacks, and plummeting investor confidence, marking a challenging time for firms and advisors. But compliance is always the foundation of a successful firm and strong client experience. Making compliance a priority — especially during uncertain times — is essential to setting your firm and clients up for long-term success. That was the consensus during the Docupace Roundtable Webinar, The Art and Science of Compliance, as compliance experts discussed how firms can set themselves up for success now to weather change.

Here’s how to prioritize compliance amid regulatory changes.

Ensure Your Firm Offers the Right Products

Strong compliance efforts are rooted in products. Not every product is a good fit for every firm or advisor, and understanding how your product offerings relate to compliance regulations is crucial to following the rules.

Many firms leverage a committee to holistically evaluate product offerings and ensure they meet the firm’s culture. This committee, or a designated employee within the firm, considers the risks of each product, the reporting required, and whether the products match clients’ needs.

But that due diligence isn’t a one-time event. A product may seem like a good fit for the firm now, but the market or regulations could change over the next months or years, potentially leading to issues or increased risk around the product. You also want to consider the industry. Would your colleague down the street consider the same product for this client? If not, regulators might see this as a red flag.

Advisors must also ensure they truly understand all the aspects of the products, including the lengthy disclosures. With so many reporting requirement details, advisors must be able to communicate the ins and outs of the product to clients. How can advisors expect to stay compliant with a product if they don’t fully understand it? Firms that lead in compliance understand the importance of selecting only the best products for their needs.

Establish Compliance Procedures

Compliance doesn’t happen by chance. It requires a concerted effort to ensure every advisor, employee, and client follows the rules. These processes are even more crucial as regulations change and ensure firms can adapt to the latest rules. Because of that make your process living and breathing, adapting as regulatory changes occur. Without a solid procedure, firms are much more likely to struggle to adopt new regulations, and compliance and the client experience could suffer.

Compliance involves a detailed process, from onboarding new clients, marketing, setting up accounts, evaluating risk, and more. Procedures ensure that nothing falls through the cracks and allow advisors to re-evaluate a product for risk and conflicts of interest to avoid potential compliance issues.

Similarly, new regulations mean firms must regularly communicate with advisors and clients to ensure everyone is on the same page. SEC and FINRA updates can be lengthy, so having a process to distill the most pertinent details, inform advisors about what it means to them, and update clients ensures every rule is followed.

Continually Invest in Compliance Maintenance

When a new regulation hits, advisors and back-office staff often must jump through hoops and change their workflows. But the work doesn’t stop after the new rules have been adopted. Maintenance is just as essential as initial compliance.

Compliance isn’t a box you can check. It requires continual effort and attention. Firms that prioritize compliance regularly re-evaluate their risks and update their strategy. The need for regular maintenance is especially strong in cybersecurity, with criminals continually updating and improving their attacks, as well as in document retention. It’s one thing to adopt a new form or process, but it’s another to store and organize those forms properly. Communication and document control are key aspects of compliance maintenance.

To keep compliance front of mind, firms must establish a culture of compliance that keeps advisors and staff up to date on changing regulations and maintains the importance of staying in compliance. Firms must also put their money where their mouth is. An uncertain economy can lead firms to cut costs, but compliance can’t be on the chopping block. As new threats emerge and regulations change, firms must devote more resources to staying in compliance. During challenging market conditions, you need compliance — especially maintenance — the most.

Are you overwhelmed by compliance maintenance? Turn to Docupace, a leader in cloud-based document storage. Our integrated system automates compliance to streamline processes and ensure your firm is efficient and compliant. Contact us for a free demo.

How do you play the game when the rules keep changing?

Changing compliance regulations compel financial advisors to ask this question. How do I remain both profitable and compliant, when firms and advisors must follow constantly changing regulations, provide a client experience that builds trust, keeps investments safe, streamline audits and avoid penalties for being out of compliance–all at the same time?

Compliance regulations are shifting, and fees are increasing — the SEC reported a 7% increase in enforcement actions in 2021 — meaning it’s never been more crucial for advisors to stay updated with regulatory changes.

But staying up to date can feel like a full-time job on top of advisors’ many other responsibilities. Here are a few ways to stay on top of changing regulations.

Who Owns Compliance?

Compliance affects everyone, but most firms delegate one person or department to lead the effort. Many firms have a Chief Compliance Officer or dedicated compliance team to stay informed about new and updated regulations and share pertinent information with the rest of the firm through regular memos or training.

But even firms without the resources for a dedicated compliance officer can designate a back office agent or advisor to perform similar tasks. This person should know the standards and work across teams to promote compliance within the organization. The compliance designee also acts as the gatekeeper for SEC, FINRA, and local regulatory changes and alerts advisors about any necessary updates or changes.

Everyone in the firm plays a role in compliance efforts by ensuring they follow the standards that are relevant to their position. But finding the information they need to follow compliance standards in their role can be overwhelming, especially if they aren’t sure where to look or if their responsibilities overlap with those of another employee. When one employee or a small team of employees monitors regulatory changes, it prevents important information from being overlooked.

Stay in Tune with FINRA and the SEC

FINRA and the SEC regularly share new changes and invite advisors and the public to comment. Staying up to date requires maintaining contact with relevant agencies and groups and participating in their communication channels.

Firms and advisors can stay informed through various channels, including:

• SEC and FINRA rule filing status reports. These comprehensive lists provide regular updates about pending changes, including what they entail, when they were filed, and if they are approved. New regulations and changes are posted on the SEC and FINRA websites before they go into effect.
• SEC and FINRA send emails to registered advisors. The SEC and FINRA regularly email all registered advisors about compliance concerns, common issues, changes, and updates. Brokers should keep their email addresses updated and read official emails.
• The SEC’s Division of Examinations (formerly the OCIE) conducts examinations and inspections of firms. To ensure transparency, the Division shares common deficiencies, risk alerts, and changes.
• Industry professional and networking groups, such as the National Association of Personal Financial Advisors, Investment Adviser Association, North American Securities Administrators Administration, and many other organizations regularly update members about pertinent changes and best practices for compliance.

Provide Advisors and Employees with Regular Training

Understanding the changes is only half the battle–following them is the other. As compliance specialists and advisors stay up to date with changing regulations, it is vital to keep the entire firm informed through regular training. When compliance remains a high priority in everyone’s minds and advisors and employees engage with resources for current regulations, firms can more easily implement compliance standards and address the firm’s highest areas of risk potential.

Posting a summary of current regulations on the firm’s intranet or another easily accessible and secure location helps advisors and employees understand the most recent rules so they can follow them without having to sort through numerous emails and memos.

Staying on top of changing compliance issues can seem daunting. But with the right systems, communication, and training, compliance updates become routine. When the compliance process runs smoothly, it’s easier to focus your firm’s efforts on providing clients with an efficient and secure advising experience.

If you have questions about compliance or want to streamline your back office operations, schedule a free demonstration with Docupace.

Opening new client accounts is an exciting step for your firm. But too often, the process gets muddied by compliance efforts. What should be an excellent time to establish solid relationships with new clients is disrupted by overly complicated compliance processes. But by streamlining new client compliance, the entire process can move more smoothly and allow advisors more time to deliver a great experience instead of chasing after personal information.

Two of the most important components of the new client onboarding and account opening process are Know Your Customer (KYC) and Anti-Money Laundering (AML). Both FINRA requirements are designed to prevent criminal activity and protect your firm and its clients from any illegal activity.

KYC requires advisors to “know and retain the essential facts concerning every customer and the authority of each person acting on behalf of such customer.” Firms must do due diligence to understand their customers and confirm identities before an account is opened. This includes collecting information like name, address, date of birth, and identification number. AML states firms must detect and report suspicious activity, including money laundering and terrorist financing.

These requirements are crucial in keeping your company honest, but they can be cumbersome and time-consuming in practice. Here is how to streamline KYC and AML compliance efforts to increase onboarding speed and efficiency.

Integrate Compliance Efforts into Existing Onboarding Processes

Your firm likely already collects all or almost all of the required KYC information when new accounts are opened. Instead of collecting information multiple times, consider integrating compliance efforts into existing processes to save time and effort.

KYC and AML can slow down onboarding when they are viewed as an afterthought and advisors have to repeatedly go back to customers to ask for information or double-check something they should already know. By integrating these processes into other onboarding systems, however, firms can get the information they need more quickly.

As you collect new client information to open the account, save it in a secure location designated for KYC and AML and then share it across secure channels. Instead of having separate systems for the onboarding team, back office staff, and compliance specialists, integrate all onboarding systems into one source of truth and share data so everyone has access to the correct information.

Don’t rush KYC or forget about it until the end. When firms try to rush through the verification process, things fall through the cracks and are more likely to be out of compliance. Take time to walk through the new customer journey, find where customers share information, and integrate KYC and AML compliance efforts into existing processes.

Digitize Compliance Efforts

Digital solutions have the power to significantly increase the efficiency of compliance efforts. Digital tools allow firms to collect customer information more easily, which streamlines the KYC process by gathering all the needed client information into one central location instead of having duplicate information in disparate systems.

Where digital tools really shine is by speeding up the verification process. Instead of manually hunting through public records to verify each client, you can quickly search online and even automate the verification process to search through online records databases. These automated digital tools allow firms to spend more time building client relationships instead of manually double-checking each piece of client information.

Keep it Simple

There are already plenty of moving parts when onboarding a new client and opening an account. And although KYC and AML are both critical pieces to the process, they don’t need to be overly complicated. Don’t feel you have to add more paperwork or numerous steps to the onboarding process to stay in compliance. Look where you are already getting the information you need for KYC and find a way to gather it in one spot to be verified.

When you feel overwhelmed by complex processes, your clients can feel it. And that’s no way to start a client relationship. Share with new clients why you are gathering and verifying their personal information. When they know the reasons behind sharing the information, they will likely be more willing to provide it promptly and build a trusting relationship with your firm.

Know Your Customer and Anti-Money Laundering requirements are crucial for all new customers. But they don’t need to overpower your onboarding efforts. Leveraging digital tools like Docupace and integrating compliance efforts into existing processes can keep your firm in compliance and protect your clients without adding unnecessary steps and stress. Find out more by contacting us today.

An integrated customer relationship management (CRM) and documentation management tool is the best way for wealth management firms to set themselves up for lasting success.

Having disparate tools, technologies, and systems that don’t play well together is a recipe for disorganization, compliance disaster, and dissatisfaction from end users — clients and advisors alike.

Why? Your CRM is the one-stop shop for customer information like contact details and historical interactions. CRM data is key to indicating customer needs, tracking sales performance, and staying organized around business efforts. Bringing that data into your documentation management tool is key for a seamless digital experience.

At Docupace, we understand just how important it is that CRM data and documentation management go hand-in-hand. In this blog, we’ll break down how integrations benefit wealth management firms when it comes to having a fully digital ecosystem, staying compliant with automation, and improving the user experience across the board.

Your Digital Ecosystem Depends on Integrations

Whereas digitization was a smaller priority in years past, wealth managers today see the value of digitizing to meet consumer expectations and needs. Indeed, having faced numerous digital challenges at the onset of the COVID-19 pandemic in 2020, 75% of global wealth managers now see going digital as a priority.

Couple that with the fiscal pressure of shrinking margins in the financial services industry, and there is a renewed focus on technology to drive down operational costs as much as possible. Finding areas where technology can move the needle and save costs — like integrations between a CRM and documentation management platform — is key to the success of this approach.

How can businesses focus on integrating their digital tools? By adopting an end-to-end, complete digital ecosystem that brings their CRM, documentation management, and other software tools together. Indeed, Francisco Uría, KPMG International’s Global Head of Banking and Capital Markets, said that digital transformation is a crucial area where wealth managers can make a difference.

“Through a wide range of digital capabilities, wealth managers have the potential to grow market share,” Uría said.

Eliminate Human Error with Compliance Automation

Compliance is a crucial consideration when it comes to integration. For example, having automated checks for potential errors like duplicate data entry or missing data fields can reduce human error for data transfer from a CRM to a documentation tool.

Reducing the cost of compliance fines and advisor time through automation and integration is huge. At a time when regulations are only increasing, cutting costs where you can is the best way to mitigate long-term risks.

Indeed, half of asset managers say they expect regulatory spend to increase in the next two years. This is significant because compliance costs already make up at least 4% of revenues — a number that increases to 10% for digitally-naive companies.

At Docupace, we’ve seen companies reduce disclosure processes by 65% and save an average of $7.75 per electronic disclosure with automation. Reducing these costs is a great way integration and automation can work to close the gap on more regulatory spend.

Engage Clients and Advisors with a Great User Experience

Last but not least, integrations between your CRM and document management tool offer a better user experience not only for internal advisors, but also for external clients who are on the receiving end of your internal processes.

Take onboarding, for example. A whopping 52% of global wealth managers are worried about losing clients due to poor onboarding experiences. Onboarding new advisors is also a common hassle for firms.

Integrations help keep the back office running smoothly. Better user experiences with an integrated CRM and document management tool mean fewer headaches when it comes to client engagement, risk mitigation, and compliance management.

If you’re interested in learning more about our platform and how we integrate with other software, learn more about what we do here.