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.

Most firms and advisors don’t suddenly wake up and say “hey, let’s fall out of compliance today.”

After all, failure to follow SEC and FINRA rules can result in severe fines, removal from professional groups, legal issues, a negative reputation, and even criminal charges for firms.

But that doesn’t mean that firms and advisors can’t inadvertently move down the slippery slope to noncompliance. It may not be intentional, but little actions or missteps can lead to much larger issues.

Stay in compliance by watching out for these 10 red flags:

Outdated Form ADV

Form ADV is required to register as an investment advisor and collects details like the number of clients or total assets under management. As situations change and your firm grows, Form ADV may become outdated, which can lead to compliance issues with the SEC. To avoid this red flag, regularly update the form, especially as your business changes.

Lack of Compliance Training

The SEC has warned firms about a rise in inadequate compliance resources, specifically when it comes to compliance training. In many cases, the poor resources aren’t a conscious decision on the part of the organization, but get lost in the myriad of other responsibilities compliance teams have. A lack of training doesn’t mean a firm is out of compliance. It does mean, however, that it makes identifying and addressing issues more difficult.

Unclear Procedures

Even with the proper resources, many firms experience the red flag of unclear policies and procedures. According to the SEC, many firms have policies, but they don’t adequately implement recommended actions. Not following compliance checklists and processes is an example of this problem. Unclear procedures can allow tasks and documents to fall through the cracks.

Undisclosed Conflict of Interest

As a fiduciary, you are responsible for protecting your client’s best interests. That means disclosing if you have a conflict of interest, such as a personal or professional connection to an account. Conflicts may arise, but the client needs to be made aware of them as they come up. The SEC carefully monitors conflicts of interest and requires all RIAS to complete Form CRS (Client Relationship Summary). Not disclosing a conflict of interest to the SEC or clients is a major red flag.

Incomplete Commission Disclosure

Some of the most common conflicts of interest are commissions or when an advisor is paid for recommending a particular fund or product. You must inform your clients if you generate profits from certain funds sold. Avoiding that disclosure puts you at risk of noncompliance.

Unsecure Digital Files

A significant part of compliance is document storage and retention. Firms can store items in the cloud, but those systems must follow specific protocols and security measures. Many firms don’t take advantage of network storage providers’ available security features, which puts them at risk for noncompliance and exposes their clients’ information to vulnerabilities.

Not Maintaining Records

The SEC’s Books and Records rule includes an extensive list of documents, records, and communication that has to be stored, either physically or digitally, for years. Some required records include email correspondence and social media posts, which some firms don’t realize they need to maintain. Failing to follow this rule by not keeping track of the proper documents for the right amount of time can be a compliance red flag.

Skipping Onboarding Steps

All new client accounts must go through AML (Anti-Money Laundering) and KYC (Know Your Customer) processes to protect against identity theft and money laundering. These processes can be cumbersome and often involve entering and verifying client information in multiple places. Firms may be tempted to skip some onboarding steps, but that can be a slippery slope for noncompliance.

Faulty Internal Access and Verification

A firm can have a robust data and document storage system, but if that system isn’t secured, it opens the doors to potential compliance issues. Systems need to have multiple steps of verification and require staff to change passwords regularly. Not deleting access for past employees and leaving private client information on screens in public areas puts a firm at risk for noncompliance.

Not Properly Destroying Physical Forms

Firms are required to keep records for years and then dispose of the forms properly. That means shredding them in a secure location where clients’ private data can’t be recovered. A compliance red flag is when firms don’t prioritize the proper disposal of their clients’ information and documentation.

Many red flags can be avoided or corrected with a secure data management platform like Docupace. Automating document management and streamlining compliance issues ensures client and firm data is stored safely and securely.

Contact us for a free demo.

What is your firm’s top priority? Is it bringing in new customers, delivering a great experience, increasing revenue, or something else?

These goals are great business objectives, but they overlook an essential firm priority: compliance. When compliance is your firm’s top priority, it impacts growth, retention, and experience.

Compliance is foundational to everything your firm does. If a firm is out of compliance, it puts clients’ information at risk, risks its reputation, and potentially spends additional time and money getting things in order again. But when compliance is a key feature of your firm, things run more smoothly, and clients know they can trust you with their personal information.

Compliance should be your firm’s top priority. But how can you make that happen, especially if other priorities already exist?

Create a Compliance-Centric Culture

As a top priority for your firm, compliance should be part of every employee’s everyday thought processes and actions. Every employee, regardless of their role within the firm or interaction with clients and data, must understand the importance of compliance and their responsibility for ensuring the firm follows regulations. When compliance is part of regular conversation and advisors understand the why behind the rules, it becomes part of a firm’s culture.

Leaders who understand the importance of compliance set the tone for the rest of the firm. Many firms hire a Chief Compliance Officer or delegate another role to lead compliance efforts. Just like you would likely assign someone to manage the firm’s other priorities like client retention, sales, and operations, you need to assign a person or team to lead the charge for compliance. Their job is to champion compliance and empower all employees with the resources they need.

Making compliance your firm’s top priority requires regular training, especially with regulations changing frequently. Sharing regulatory changes and updates at all-hands meetings, posting updates and compliance reminders throughout the office and in the firm’s internal communication network, and hosting specialized training sessions throughout the year are all ways compliance becomes integrated into a firm’s DNA.

Incorporate Compliance into Established Processes

One of the biggest roadblocks to full compliance is that it often seems like another box to check or hoop for advisors to jump through. But when compliance is a top priority, it supersedes other processes and becomes the first thing on the list. Making that happen is much easier when compliance is integrated into existing processes.

Firms typically have numerous processes for various accounts and projects, including client onboarding, information gathering, new account opening, and more. Each of these actions also has correlating regulations to follow, such as Know Your Customer, Anti-Money Laundering, and Books and Records. Integrating compliance into existing processes means that as back office staff and advisors go through these processes, they continually check that they comply. They don’t wait until after onboarding to gather and verify a client’s information because it is an established part of the process.

Integration helps compliance become essential to every action your firm takes instead of an afterthought.

Invest in Compliance-Focused Technology

Investing in compliance technology also showcases that your firm truly cares about compliance. It isn’t just something you say is a priority — it’s somewhere you are willing to invest for the good of clients and employees.

Compliance technology has countless benefits, including speeding up the verification process, managing documents properly, connecting the proper documents with the right clients, automating repetitive data entry tasks, and many more. Technology makes it easier to stay compliant, which empowers advisors to follow regulations without sacrificing time spent building client relationships.

Digital tools make it easier for firms to continually stay in compliance without having to rush to find crucial documents before an audit. Technology allows firms to collect and manage client information more easily, streamlining compliance efforts and storing information in one central location instead of spreading it across disconnected systems. Compliance-focused technology empowers advisors to follow regulations without sacrificing time spent building client relationships.

Making compliance your firm’s top priority not only sets you apart from the competition but establishes you as a client-focused firm that values data security. With regulations changing frequently, prioritizing compliance is no longer just a nice thing to do — it’s a requirement for firms to stay relevant.

One of the best tools to help streamline compliance efforts is Docupace, the leader in cloud-based document management. Click here to learn more about Docupace and schedule a free demo.

Under SEC Regulation Best Interest (Reg BI), broker-dealers and financial advisors must place the best interests of their customers (retail investors) ahead of their own.

Reg BI includes a variety of new rules and obligations, but the most tangible is a paperwork requirement: Form CRS.

What is Form CRS?

Form CRS is a relationship summary disclosure form (“CRS” stands for customer or client relationship summary).

As part of their disclosure obligations under Reg BI, broker-dealers and financial advisors are now required to share versions of Form CRS with retail investors.

For a more in-depth explanation, see Electronic Delivery & Storage of Form CRS: The Key to Simpler Reg BI Compliance.

What is the purpose of Form CRS?

According to the SEC, the main purpose of Form CRS is to provide retail investors with “simple, easy-to-understand information about the nature of their relationship with their financial professional,” in order to help them compare services between firms and make more informed decisions.

What must be included in Form CRS?

Specific requirements vary based on the services provided by the firm, but at a minimum, Form CRS must include:

• Firm registration information (including whether the firm is registered as a broker-dealer, investment advisor, or both)
• A description of all services offered by the firm
• Information regarding fees and costs (including principal fees and costs, custodian fees, account maintenance fees, and others)
• Information regarding conflicts of interest
• A summary of the firm and advisor’s disciplinary history
• “Conversation starters” for customers to ask their advisor or point of contact

View complete SEC Form CRS instructions

When do firms have to send Form CRS?

Firms must deliver Form CRS to customers and prospective customers before or at the earliest of:

• Entering into a new investment advisory contract
• Opening a new account
• Making recommendations regarding investment products, strategies, or account changes, including retirement rollover

Firms must also provide Form CRS upon client request, and whenever amendments or updates are made to the content of Form CRS.

How can I learn more about Form CRS?

If you still have questions about Form CRS, here are a few helpful resources:

• Full Form CRS guidelines from the SEC
• Form CRS summary and FAQ from the SEC
• Reg BI and Form CRS checklist from FINRA

Additionally, small firms may send implementation questions to the newly established inter-divisional Standards of Conduct Implementation Committee at IABDQuestions@sec.gov.