The pressure to go digital has become impossible for independent firms to ignore. Clients are clamoring for up-to-the-minute access to their accounts. Data-driven tools and robo advice are becoming the norm. Yet new compliance requirements are also coming thick and fast. How do independent advisors meet comply with the latest regulations, while also upgrading their practice safely, efficiently and inexpensively?
Suleman Din, Financial Planning managing editor, spoke to RIAs in New York, Hawaii and numerous states in between to find those who have embraced the challenges — and can teach their peers a few things about navigating these demands successfully. It may not be cheap up front, but it’s worth it, he finds.
The most successful firms “are willing to allocate 10% of their operating expenses to tech/compliance issues,” Din says. “Instead of being stuck grousing about the burden of costs, they are proactively budgeting for solutions.”
It’s going to pay off, Din writes. “RIAs that accept change are able to find effective and cost-savings solutions to upgrade their practices.”
More than a few upgrades may be required to fix FINRA’s arbitration system, however. Curious about why some advisors’ disciplinary records had disappeared, Financial Planning senior editor Ann Marsh spent months investigating the self-regulatory organization’s arbitration process. What she found was a systemic purging of records, and angry clients who felt they’d been first wronged, then railroaded.
“I was certainly surprised to learn that everyday investors, most of whom are worn out and aggrieved at their losses, must continue to effectively serve a regulatory role if they want to maintain the public record of their complaint against their ex-broker,“ Marsh says.
Marsh reports that FINRA’s process for investor complaints encourages clients to take settlements and remain quiet. Though the practice of firms offering money to clients in exchange for their agreement to not oppose advisor disciplinary records was banned in 2014, there’s more to be done.
“Financial firms will fight for years to try to achieve expungements,” Marsh said. “How can clients be expected, with no pay or other support, to keep up the fight against them?”
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