Compliance is often seen as a mundane necessity in the financial services sector – a box-ticking exercise that drains resources and stifles innovation. I’ve frequently heard compliance referred to as the “sales prevention” department by financial advisors frustrated by cumbersome procedures and slow workflows that delay business and create a less-than-stellar client experience.
The wealth management industry is heavily regulated – and that’s a good thing. Being responsible for people’s financial futures is an enormous responsibility, and secure guardrails need to be put in place.
But what if we reframe compliance from being a necessary cost of doing business to a strategic advantage? Compliance doesn’t have to be a burden and a drain on resources. It can be a powerful differentiator that sets your firm apart in a crowded market. Your compliance department may never be a revenue generator, but by adopting an authentic “culture of compliance,” being forward-looking and efficient, and avoiding reputationally and financially crushing regulatory penalties, you can free assets to allocate to business-building growth activities.
You can free assets to allocate to business-building growth activities.
Here are five steps you can begin implementing today to turn your compliance obligation into a strategic advantage:
Proactive risk management: By integrating compliance into your core operations, you can anticipate and mitigate risks before they become costly issues. This proactive approach safeguards your business and builds trust with clients and regulators. It may entail a cultural shift among your internal teams, but the rewards can be worth the effort.
Enhanced operational efficiency: Compliance technology must be essential to your overall tech stack. By introducing systems and tools that can automate tedious processes, reduce manual errors and free up hours for your compliance team to focus on value-added activities, you can make significant advancements in workflows, outcomes and staff job satisfaction. Streamlined operations lead to better resource allocation and increased productivity.
Data-driven insights: Compliance systems generate valuable data. However, like in other parts of the business, collecting copious amounts of data is useless if it is never looked at or used to drive decisions. Analyzing the data sitting in your compliance systems can provide insights into everything from business trends to customer behaviors to operational efficiencies. Knowing what data you have at your fingertips and how to leverage it can help inform your strategic planning decisions and drive growth.
Competitive edge: Firms that embrace compliance as a strategic initiative, make it part of their value proposition and talk about it positively with prospects and advisor recruits can differentiate themselves in the market. The days of thinking of compliance as a “necessary evil” should be long over. We have all seen cautionary tales of firms that did not take their compliance obligations seriously. Demonstrating robust compliance can enhance and preserve your reputation, attract quality clients and open doors to new opportunities.
Adaptability and resilience: As the industry continues its fast-paced evolution, the regulatory landscape is constantly changing to keep pace. Potential shifts in the balance of power in Washington will also impact legislation and agency priorities. Firms need to be ready regardless of how the compliance winds blow. A robust compliance framework, properly funded and built in partnership with the right solutions provider, can help ensure your firm has the agility to quickly adapt to any new regulations, maintaining business continuity and competitively.
What better way for compliance to be less “boring” than to lead the firm’s AI revolution?
Compliance is an early use case for firms looking to incorporate more AI into their enterprises. With the amount of data a compliance department has to parse, keep updated and put into practice to update policies, Generative AI is a natural solution. And what better way for compliance to be less “boring” than to lead the firm’s AI revolution?
Turning compliance into a strategic advantage is possible for wealth management firms of all sizes. It takes some effort and resources, but mostly, it’s an attitude shift by a firm’s leaders. The five areas discussed above are critical tactics, but making room at the executive table for the CCO when long-term planning is being discussed and decisions are being made is an obvious first step.
Sid Yenamandra is Co-Founder of Surge Ventures, a fintech venture studio, and CEO of RegVerse, a regtech provider of AI solutions, including the Avery generative AI-based platform.
