Implementing Compliance Technology Strategically

The time has come to shift from talking about change to making it happen, especially when it comes to adding compliance technology to your firm. The pandemic highlighted the problem that one cannot move paper and disparate data fast enough to analyze and implement a competitive strategy, nor efficiently address ever-expanding regulatory oversight. The key is not just acknowledging technology for technology’s sake, but to determine specifically where and how it can strategically provide an encompassing solution to a vital business challenge.

Unfortunately, the problem in the world of technology is that many users find it hard to choose and implement the right technology in the most efficient and productive way. The problem stems from most professionals “not knowing what they don’t know” when it comes to technology. They do not know what the tech solution process entails, particularly how a technology can re-structure and automate an end-to-end business process. Technology should be a substantial timesaver, simplify complex processes, and provide security for your business and clients. But the key to success is in how that technology is deployed.

To explore this further, we decided to check in with Institute member Mac Bartine, CEO of SmartRIA – a software as a service (SAAS) compliance and business management platform for RIAs - to learn from his experiences in working with thousands of RIAs across the country on implementing compliance technology solutions. His firm was started by a financial advisor from the perspective of addressing a vital real-world business problem with a practical technology solution. We asked questions to help provide clarity on the critical issues behind implementing compliance technology for your organization.

Hortz: What do you see as the greatest challenges for advisors in implementing new technology in their firm?

Bartine: One of the greatest challenges we regularly see with firms implementing new technology is in trying to encourage employee adoption of new tools and systems. Many companies struggle to gain traction internally; of being able to turn the technologies into a solution that teams on the ground can actually adopt. Reports from the Harvard Business Review and Forbes Human Resources Council reinforce this point and suggest how the adoption of new software needs to happen with enthusiasm from leadership so that employees get on board. There also should be a robust and frequent offering of training opportunities, learning modules, and knowledge-based articles and videos for employees to embrace new technology in the way that’s best for them. 

Hortz: Are there particular problems in how firms are implementing technology for compliance?

Bartine: The most common problem we have observed with the implementation of compliance technology is not having data that’s organized for compliance oversight and management. It’s crazy that people need to think about that, but they do. How your data is organized matters during oversight and especially matters at exam time. If data organization is not your thing, that’s OK! It is not most people’s thing. But be prepared to do some data cleanup when you adopt a good compliance system to help it to work optimally. Any reputable compliance software vendor will offer services to help you get your data in good order, as it is a very common problem.

Hortz: What do you feel are the top attributes of a highly effective compliance program? What are the goals for a firm’s compliance tech strategy?

Bartine: I’ve said this many times, but it’s worth repeating to answer this question. Compliance is complicated, scary, time consuming and expensive, and the compliance professional on your team cannot be the only person who’s doing their part, or you are going to have an unpleasant exam. Based on this reality, your compliance solution must be easy for everyone to understand and use. In the realm of RIA compliance, where the fiduciary standard must be constantly maintained and quickly provable in an exam, your compliance solution has got to be great at fiduciary oversight and management. Compliance after the fact is better than no compliance, but it is not ideal. You want software that is going to help you take a proactive stance towards your compliance obligations, so you catch issues before they become a problem.

Hortz: Can you share a few examples of how you are working with firms to successfully implement compliance technology in their firms?

Bartine: Compliance software is a game changer for many firms. To drive success, we focus on a deep understanding of the issues each firm is trying to resolve. Most firms with established compliance programs already know how they want to run their program and can identify the problems they want to solve pretty quickly. This allows us to create a customized implementation plan that focuses on those areas first. Having those wins early on makes it much easier to continue integrating technology into compliance operations.

For firms who are in the early stages of developing their compliance programs we provide a compliance calendar on our award-winning platform that is ready to use on day one. This template calendar is vetted by our network of consultant partners and can be customized by a compliance consultant if desired.

We have firms who have spent hundreds of thousands of dollars on other technologies that just didn’t work. That is why we work with firms as strategic technology partners on implementation, not just a technology vendor. We have found that success in compliance has also led firms to further success in their business.

Hortz: The Division of Examinations (the “Division”) of the U.S. Securities and Exchange Commission (SEC) releases regular risk alerts about its assessment of investment adviser firms and their practices. How do their risk alerts help provide guidance on the type of compliance solutions/resources needed?                                                    

Bartine: The SEC is openly communicative about its focuses and concerns, and these notices back those communications up. Different platforms take different approaches to evolving with compliance needs. Our philosophy from the beginning has been to solve as many compliance problems in one place as is possible, while maintaining ease of use. So, when the Division highlights a problem that we believe needs to be solved and that we can or should solve with our platform, that is when it goes into our development plans.

Hortz: What have the risk alerts been identifying currently as major areas of concern?

Bartine: The number of SEC exams is definitely accelerating, and firms need to be ready. RIA firms’ fiduciary duty is at the top of the SEC’s mandate to protect investors, and we’re seeing that with increasing scrutiny of wrap fees, billing on margin, and billing for cash. Revenue sharing or 12b-1 fees are also very under the microscope for conflicts of interest with fiduciary duty.

Looking a little further down the road, November 2022 is the compliance date for the new Marketing Rule. 12 months from now will be here before people know it, and compliance is top of mind for Advisers who are taking advantage of the new marketing opportunities it allows.

Hortz: How did you deliberately design your compliance technology to address issues like these and be flexible enough for future issues to come?

Bartine: Our compliance technology platform is customizable, in real time, to respond to new regulations and changes in examination focuses. For example, we are already gearing up for the new Marketing Rule in 2022. Meanwhile, firms we work with are increasingly being asked by regulatory bodies whether they use compliance software. The benefits and importance of technology to manage compliance is becoming an integral part of doing business for RIAs. Our software innovation and progress are constantly evolving to meet the industry’s changing needs and focuses. Regulators are already signaling that firms will need compliance software such as this so can they safely grow their business in the future.

Hortz: How does all this improve a firm’s corporate resilience and relationships with customers, staff, and stakeholders?

Bartine: It’s hard to emphasize too strongly that how you implement compliance management is a critical strategic decision. Your choice in compliance tech will have an impact on your business, and the right decision will significantly reduce your risk, proactively help you manage new regulatory changes as they become a priority, reduce stress among your staff, and give you something positive to share with your clients.

How you talk about your compliance program with your clients is another conversation, but people do appreciate being protected by those who they hope to trust. Compliance done well and explained simply can build goodwill that can translate into longer, better client relationships. 

Hortz: Any other thoughts or recommendations you can offer advisors on strategically implementing technology?

Bartine: We have observed SmartRIA customers demonstrating our platform to RIAs they are courting for acquisition to show them how much easier their compliance obligations are going to be. That’s one of many strategic use cases that illustrate compliance technology as a business development tool for the firm.                                                 

We invite advisors to learn more by visiting our Resources page and offer our firm as an ongoing, regulatory compliance resource.  Our belief is that Compliance software that’s easy to use and to understand has a lot of power you can use to help you grow.

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