Compliance Is Not the Enemy
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
In the finance industry, the word “compliance” garners a negative connotation. Indeed, it conjures images of being paddled by a schoolteacher.
But while compliance has historically had a bad rap, there is so much to compliance – much of it positive – that I will unravel. Looking at it through the right lens provides a better understanding of why compliance is not a compilation of chaos but a simplified puzzle.
It’s a matter of the proper interpretation with the right frame of mind.
Compliance is a lesson in embracing change, adapting to ever-changing rules and regulations, and welcoming them while figuring out the best way to incorporate and translate them beneficially. The biggest challenge I face in financial compliance is the advancement of technology, where the rules that apply to our profession have not kept pace with today’s rapidly developing fintech. My firm has pivoted to the Microsoft Teams platform, simplified order processing, surveillance, and education – all thanks to the progress of technology.
Advances in technology
Hard copies are gone. Tech is at an enterprise level and has become a collaborative effort. We can “pop into the office” with the click of a button. It’s our new form of hanging out and grabbing a cup of coffee. We now do it from the comfort of our homes and with our own coffee mugs. We have become good at building relationships with spontaneous outreach.
Tech has helped us do our jobs better. Data is much more readily available with email reviews, system alerts, conferencing tools, and cross-referencing algorithms. And yes, the pandemic lit a fire to make this all happen at lightning speed. Our phones now link to our computers, we have the instantaneous gratification of DocuSign, and we have portable laptops and displays.
Back in the day, we were scanning, saving, and faxing.
Some regulators were slow to adopt those advances, like e-signature, but have come to embrace the new. The regulatory relationship has shifted. Firms’ needs have led to an open dialogue with regulators that are driving technology adoption and acceptance. Consider branch reviews: Inspections that not so long ago were only held in person are now virtual walk-throughs with handheld devices. Regulatory examinations have shifted in the same way. We have systems that talk to each other. Only a few years ago we had to log in to different applications, often referred to as “swivel chairing.” Now we have central repositories for data. We no longer “write code” – it is done using parameters with matching fields.
The rules are changing for all of us. But too often, the rules do not keep up with the advancing technology.
A great example is texting – it’s an area of focus in our profession. Texting has become commonplace in our society. Everyone is doing it and we must determine how to best accommodate it given our profession’s regulatory guidelines and boundaries. New apps inflict hardship on firms trying to comply. The communication rules eight years ago were broad; now, they must be narrowed in the relevance of social media, retail, and WhatsApp – both internally and with clients.
Superheroes flying capes
This brings me back to my original premise. Compliance serves a very specific purpose. We are tasked with interpreting the rules and regulations and ensuring we address them in our compliance program, developing our own written supervisory procedures (WSPs) and other policies to comply with regulations. It is our compliance program, and we create it with each of our unique businesses in mind. We must think carefully about what business we do and how we execute it, and then consider applicable rules and regulations and their application to our business. From there we customize a compliance program – of which WSPs are a large part – to ensure we comply with those rules and regulations that affect our business. It’s like mowing the grass, section by section.
Compliance is always growing and changing, and we must pivot quickly. When regulators circulate “hot topics” documents, we must evaluate them promptly and respond appropriately. Such notices help us to “get ahead of the curve” in developing policies as new factors come to light that we must consider.
Compliance is about protecting public investors, as well as serving and protecting the professionals who utilize their offerings. Compliance is not a bad word. We compliance professionals like to think of ourselves more as superheroes, gatekeepers, and security officers – a division that has the best interests for all in mind and that flies the cape proudly.
Barrett Schultz is chief compliance officer at CoastalOne (www.Coastal-One.com), an independent broker-dealer, RIA platform, and managing broker-dealer that delivers comprehensive financial products, utilizes the latest innovative fintech, and provides thorough concierge service to financial professionals and investors. Schultz has worked in the financial services industry for over 25 years and in compliance for over 15 years.