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Compliance and Automation - An Ideal Unison

With the world economy facing turmoil after the coronavirus pandemic, every career was impacted including that of financial advisors. Once the situation was accepted, financial advisors were forced to find ways to connect with their clients remotely. Over time this had become the new norm and led to further accepting technology-enabled solutions to the situation. 

Now that clients were facing strict lockdowns, there was a drastic change in client behavior. Increased anxiety and apprehension due to the economic downfall had people reaching out for professional financial guidance. However, financial advisors faced the compliance pressures even more with the regulatory firms enforcing stricter measures during this time of havoc. 

What Does Compliance Mean For Financial Advisors?

One of the most difficult challenges for a financial advisor is to ensure every action taken complies with the regulations stated by regulatory authorities. Violating the rules may result in serious consequences, including heavy fines, suspensions, and even jail time. 

According to some financial advisors, a bulk of their time is often invested in dealing with compliance issues. In addition, rookie financial advisors often fail to comprehend the minute details that are entailed in compliance regulations. Furthermore, some individual or firm-based advisors simply lack the budget to acquire competent staff to deal with their compliance concerns. 

The fast evolution of digital marketing has created its own set of rules for financial advisors to adhere to when using social media marketing techniques. The solution for this increased pressure of compliance from all ends could best be resolved through the acceptance of automation into their current business environment.

What is Automation?

First, let's first fully understand what automation truly means. According to the big technological giant, IBM, automation is the acceptance of technology or applications that reduces human input.

automation software screen on tablet

For financial advisors, process automation is the key which means incorporating dedicated software and applications into the business to increase efficiency and that means solving compliance concerns much easily through acceptance of technology rather than manual work.

Finance advisors can seek solutions in next-generation advisor platforms that integrate Customer Relationship Management (CRM) capabilities, financial and investment planning, monitoring, reporting, and other functionalities. The following are some areas where accepting an AI solution will make it much easier to achieve efficiency all the while following compliance regulations as well. 

Automation Delivers Speed, Efficiency, and Cost Reduction

To meet stricter regulations now being enforced by FSRA (Financial Services Regulatory Authority of Ontario), financial advisors must ensure they have the proper certifications that are now required by the government. This means more financial costs for your documentation and one way to decrease your cost, is to automate the process. 

When your office is struggling to keep up with the increased workload, adopting specialized software for financial advisors could significantly help in increasing the efficiency of all that manual paperwork that takes up a huge fraction of your time. 

automation crm screen

According to Jim O’Conner, of The Hackett Group says, “Organization needs to spend more time managing risks, and less time managing data - approaches that deliver efficiently and effectively, and drive quality into the process, have immense value.” 

Some of the areas that can benefit tremendously from the adoption of automation for data management are:

  • Reducing administration cost
  • Cost of documentation
  • Moving from manual signatures to digital signatures
  • Document workflow cost: shift it to automated workflow done all via digital means
  • Improving SOR (System of Record) with digital forms 

Automating all these tasks means lots of time saved, and since time means money, it means reduced management costs. This would allow you to allocate more money for receiving the required credentials and documentation that are necessary for you to ensure your compliance as a financial advisor. 

Risk Management Analysis Tool

New advanced advisory platforms can assist financial advisors with comprehensive risk management scenario tools. Such software or applications allow advisors to run different scenarios to assess risk before executing any actions. This often time can raise any alarms before any laws or regulations are violated.

risk analysis software screens

Supervising Junior Advisors

When working with a firm, not only is it essential you stay within bounds of compliance regulations but make sure your team members are doing the same. Rookie financial advisors often join the field without reading the “fine print” that can be found in compliance regulations. 

To solve this, many platforms come with the functionality that allows senior financial advisors to manage other financial advisors to ensure they too are following the rules. 

General Compliance Checks

Furthermore, advanced advisory platforms conduct general compliance checks before a financial advisor even prepares a financial plan for its client. 

Since regulatory bodies are often updating rules and regulations, compliance management software assists by keeping track of these changes. They further help by documenting any anomalies and identifying any non-compliance.

This reduces a lot of stress for financial advisors since an autonomous tool takes responsibility for detecting non-compliance while allowing them to focus more on tasks that require human interaction.

Automation Benefits for Specialized Financial Advisors

Not all financial advisors are the same and specialized financial advisors often require specific functioning tools to assist that are particular to their area of specialization.

Let's take IARs as an example. 

Investment Advisory representatives or IARs are financial advisors that assist clients with investment-related advice. Because they are licensed advisors, IARs, and must have certain certifications, they are required to be in strict compliance with the government regulations. 

Some of the latest CRM software designed especially for IARs have tools in place that allow advisors to store all relevant client data including that of discretionary accounts. A discretionary account is an investment account that lets an authorized broker buy and sell without the client's consent for each trade. The client must sign a discretionary disclosure with the broker as documentation of the client's consent. 

Rather than following the manual channels for particular tasks, having an automated system set in place for them will allow IARs to ensure compliance along with increased efficiency.

What Are Your Thoughts On It?

With the world facing the pandemic for the past two years and the rise in the need for digitizing almost everything, the financial industry along with the rest must realize the benefits of accepting automation. With the increased efficiency and lower management costs, financial advisors can spend more time focusing on managing clients according to the government's increasingly strict compliance regulations.