Ask Brad: How to Fire Your Compliance Department

This is the latest installment of a regular column to answer questions from advisors who are considering transitioning to an RIA model. To see Brad’s previous articles, click here. To submit your question, please email Brad here.

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The overwhelming majority of financial advisors are of the highest caliber. However, any time a profession numbers in the hundreds of thousands, there will be a few bad apples. Industry regulations have been put in place to protect against the nefarious actors.

The compliance teams at the large brokerage firms are tasked with interpreting and implementing those regulations. They are performing a noble and necessary task.

The oft-heard gripe about compliance is rarely directed at the mission they are tasked with performing.

It is with its delivery.

We have all experienced an overly restrictive implementation of a regulation, often due to the firm needing to manage to the lowest common denominator. Put differently, “We don’t know who the bad apples are at the firm (yet), so we have to put tighter guardrails on everyone.”