How Financial Firms Use Technology to Keep Up with Compliance Changes

The SEC recently made a substantial change to its Customer Relationship Summary that largely went under the radar: the removal of the word “fiduciary” from mandated language RIAs must use to describe their standard of conduct. This is not to say that RIAs cannot use the term “fiduciary” or are unable to tell clients that they are fiduciaries, but the language is no longer mandatory in CRS disclosures. The general goal behind this change is to give firms more flexibility and less red tape when developing the messaging used to address topics that matter to clients. But there have been numerous complaints around the wording of the new rule, leaving firms uncertain about how it affects their CRS disclosures, if at all.

The confusion and implications surrounding the language of the change are not the only issues here. The underlying stressor for all financial firms—not just RIAs—is that this is just one of many changes that’s been made to compliance regulations over time. A recent Thomson Reuters survey found that more than a quarter of all financial firms spend eight hours or more every week tracking and analyzing regulatory changes. To keep up with regulatory updates surely means reduced risk of fines, but also means that firms are forced to put more time and resources into risk mitigation and less time into engaging and retaining clients. Further, ninety-five percent of firms say that regulations will lead to increased costs this year, and 24 percent will be spending more than 5 percent of their entire annual revenue on compliance by 2023. And as firms struggle to differentiate themselves and feel the pressure of fee compression, compliance should be one of the last places to which they allocate their budgets.

Despite firms spending so much time and money on tracking and analyzing regulatory developments, the wider use of technology and more creative solutions is beginning to help, according to Thomson Reuters. Firms that have learned how to leverage technology that automates processes that were previously manual, such as market monitoring and content updates, are starting to reap the benefits of more time spent with clients.

According to Duff and Phelps, there is risk associated with adopting automation technology for compliance and disclosures, but the risks of not adopting could be even higher:

“As regulators’ sophistication grows, their expectation of firms’ own capabilities to automate compliance and market monitoring does, too. On one hand, that’s a significant threat for those firms that fail to take up the challenge… On the other hand, though, it could offer two benefits. First, the promise of more orderly markets, which should be good for the industry as a whole and prevent the unscrupulous and unfair gaining of advantage. And second, the potential for solutions that, through automation, actually ease the regulatory burden, and perhaps halt the rise in compliance costs.”

Regardless of where you fall on the supporter-detractor scale of increased regulation, the majority of firms would agree that making compliance rulings and changes easier to consume and implement is a high priority for 2019 and beyond. Because when you’re spending less time and money on market monitoring and manual updates, you have more time to meet with, engage and retain clients.

Why Sales Enablement and Automation Technology is Important

Sales enablement and automation technology can help firms tackle compliance issues head-on. In an upcoming webinar, Be Compliant and Compelling with Seismic and MindTickle, you’ll learn how to break down the organizational siloes that impede efficient compliance processes and better align teams through efficient content processes. The benefits across your firm include:

Marketing removing bottlenecks in the creation and distribution of materials.

Sales & client teams delivering the most compelling and compliant pitches to clients.

Compliance spending less time manually monitoring, updating and approving disclosures.

Your firm mitigating risk and creating an audit trail of compliant materials, updates, and behavior.

Join us on June 26 at 3 pm EST to learn how to cut compliance costs, drive more efficient processes, and improve client engagement.


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