Turning Compliance Into A Sales Funnel—Exploring Compliance Practices


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Peter Fang, CFA, is the Chief Compliance Officer and CEO of Hoovest Financial Inc., an investment fund manager, portfolio manager, and EMD.

The Problem Is Not Compliance—It Is Over Compliance

In recent years, I have come across many investment advisors switching dealers because they believe their current dealer firm is stifling them with compliance.

In my experience, it is not that advisors do not like compliance, it is that they do not like over compliance or compliance creating more work or acting as a roadblock. Compliance should be seamless and aim to help the advisor’s business, not hinder it.

What does that mean?

Here’s a simple example of good compliance. Part of compliance is making sure advisors have all available client information on hand. Take the case where an advisor is using manual processes and simply forgets to acquire, say, something innocuous like the back of a client’s driver’s license. Then, compliance reminds the advisor, “Hey, there’s no back of driver’s license, I need you to get it.” The advisor is now annoyed at compliance for requesting what is always going to be and always has been a requirement.

Another simple example is taking good notes or updating client files upon annual reviews. It is tedious work and annoying. If good notes are not kept, or client files are not up to date, compliance must be the “bad guy” and ask the advisor to take better notes and update the client file. In reality, it is a failure of the process that is negatively affecting the advisor.

If there was a simple and compliant process in place so the advisor could easily capture notes and update the client file in a templated manner, the advisor would do so. The advisor would then be better off, as they would be doing a better job. Additionally, the client would think that they are being managed professionally since there is clearly a template of which the advisor is using.

Being Proactive Empowers, But Being Reactionary Stifles

In some firms, you may see that the way compliance works is reactionary and therefore a counter-department to other departments in the firm. For example, compliance is often the last step in a workflow whether you are onboarding a new client or creating new marketing material for an offering. This results in compliance always “acting as the bad guy” or the annoying “no fun” department that just wants to quash everything.

Instead, good compliance practices should be built directly into workflows from the start so that nothing is missed. Compliance should not have to “be the bad guy,” but instead, they should simply be able to sign off on work being done. One firm created a workflow whereby compliance pre-checks forms before going out to clients for signature. Many other firms still have “branch manager signoff” as the last step, and often require advisors to get client signatures on corrections on forms. Going back to clients to fix mistakes simply wastes everyone’s time and sends a message of unprofessionalism. Pre-checks can eliminate many of the unnecessary back-and-forth corrections.

Workflows Should Involve Input Of All Stakeholders—Including Compliance

An even more elegant and complementary solution is to design workflows that eliminate the chance of even making a mistake as much as possible. This is where compliance input in workflow and helping to design workflow becomes crucial in a process being “tech-team driven” or “user-driven.” To me, “user-driven” designs mean incorporating the input of advisors, compliance persons and clients.

Clearly, the better approach is for compliance people to work with advisors, not against them. Compliance and advisors should work together to create effective workflows from the beginning with input from all stakeholders.

Compliance As A Sales Funnel?

A proactive compliance mindset enables firms to think outside the box. Applying internet marketing as an example, a firm with a proactive compliance culture realizes early that once the marketing content is disseminated, it is difficult to track and monitor. Therefore, a proactive system creates pre-approved content (articles, performance data and market commentaries) or provides customizable content with a streamlined pre-approval process that advisors can plug and play into their marketing, social media and lead generation campaigns. Then, they can feed right into account-opening systems.

The seamlessness of a platform or workflow also enables a lot of possibilities such as: use of online advertisement channels, incorporating CRM into onboarding workflow, social media monitoring and allowing for annual review processes.

Proactive Compliance Culture Trumps Any Specific Processes

There is no one compliance process that fits all. Advisors vary widely in marketing styles (from strictly face-to-face, in-person referrals only, to online marketing gurus). What is crucial is a compliance culture that puts compliance in the hands of the advisors. A compliance culture that values advisor diversity, is principled in its approach, and has the mindset of empowering the advisors (to service clients well while avoiding regulatory issues) goes a long way for a firm’s success. Compliance is not meant as a veto for advisors. Compliance should serve the advisors because, in essence, great compliance keeps advisors compliant and effective.

This compliance mindset is far more important than adopting any software as “good compliance gimmicks” to attract advisors only later to revert to the same old mindset of a reactionary and authoritative compliance regime. Culture, however, is the most difficult part of a firm to change and most difficult to copy or emulate.

Software and workflow that build compliance processes alongside marketing and sales functions are the future of wealth management, where compliance workflow becomes the sales and marketing funnel. A “good” compliance culture is key to enabling this metamorphosis.

A proactive, collaborative compliance culture can empower advisors and all firm participants to be effective at the singular valuable goal of attaining, retaining and servicing clients. An authoritative, reactive, self-aggrandized compliance regime will stifle any change and hold back the true potential of advisors.

The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.

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Nicole Lambert
Nicole Lambert
Nicole Lamber is a news writer for LinkDaddy News. She writes about arts, entertainment, lifestyle, and home news. Nicole has been a journalist for years and loves to write about what's going on in the world.

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