Embrace Compliance and Suitability with Modern Technology

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In 1934 under the Franklin D. Roosevelt administration, the Securities and Exchange Commission (SEC) was established to enforce federal securities laws and regulate the securities industry. Obviously, many things have changed and evolved in technology and the financial services industry since 1934.

One thing that hasn’t changed, however, is the age-old problem of compliance and suitability. While many financial professionals continue to face challenges related to compliance and suitability, keep in mind that you have access to a more powerful set of tools that can help your clients, your practice and your firm achieve compliance and suitability.

com • pli • ance

State of being in accordance with the relevant federal or regional regulators and their requirements

suit • a • bil • i • ty

A requirement set to determine if an investment strategy is appropriate or suitable for a given investor. Can be based on the investor’s goals and financial situation, and in most cases suitability needs to be updated periodically to address the client’s changing needs and objectives.

Before people confuse the terms “compliance” and “suitability,” it’s important to understand each word’s respective meaning. The definition of compliance is the state of being in accordance with the relevant federal or regional regulators and their requirements. Suitability is, on the other hand, a requirement set to determine if an investment strategy is appropriate or suitable for a given investor. Suitability can be based on the investor’s goals and financial situation, and in most cases suitability needs to be updated periodically to address the client’s changing needs and objectives.

Important Questions to Help You Keep Up with These Rules

Unfortunately, some people believe that you, the financial professional, are always on the “hot-seat” regardless of what you do. Thus, there are a few key things to consider when helping your clients achieve their financial goals:

1.  How can you determine if your clients are being honest with their financial situation?

2.  Once you have ascertained your clients’ objectives, what can you recommend as possible solutions or strategies?

3.  Now that you have created a solution based on your clients’ needs, what will you do when their needs change?

4.  Have you created a systematic process that documents, monitors and manages all of these requirements?

5.  The last and typically most overwhelming question is how are you staying up-to-date with the current rules and regulations (and with all the appropriate bodies), so you can maintain compliance and offer suitable recommendations?

Technology Helps You Refocus on What Matters – Your Clients

Although you may still utilize physical file cabinets, paper files, fax machines and hardline telephones, it’s time to embrace today’s era of automation and technology. By adapting to this technology, you’ll become more efficient so you’ll be able to spend quality time on what matters. This may be building better relationships with clients and getting in front of more qualified prospects. As a financial services professional, the heart of your business is providing clients with compassionate, customized service combined with goal-oriented planning. Embracing automation and technology helps you, which in turn, helps your clients.

Start with Your Current Resources

Let’s begin by trying to identify core technology services already offered by your firm. As a value-add, most broker-dealers, RIAs and insurance companies offer numerous technology options to help you to stay organized and efficient. Why does this matter? The technology that is readily available by your firm has already been tested for security, functionality and accuracy. If you don’t like what programs are available from the firm’s technology offerings, then that’s okay. If you are more of a trendsetter and want customized solutions, seek providers for the benefit of your business. But remember that you are also a customer to your firm. Firms want happy customers, so that’s why most firms welcome suggestions from their ranks. Innovative suggestions help firms drive compliance and increase sales. It’s a win for you and your firm.

Get Powerful and Accurate Financial Planning Software

A client’s financial plan is a living and evolving story that will develop over their lifetime.

There are many companies that offer different analytical planning solutions based on the Monte Carlo Theory. As you may recall, the Monte Carlo simulation is a problem-solving method used to identify the probability of certain outcomes. This simulation can assist you and your clients in identifying goals, risk tolerance and time horizons to help protect and grow their assets.

So, how can you decide what financial planning technology vendor is the best fit for your practice? It’s important to evaluate and select software that is flexible enough in scope to be able to assist you with identifying a simple goal-based plan. The software should be able to help you develop a more complex, all-encompassing plan that addresses full cash-flow and estate planning. There are so many great companies that provide software solutions, such as FinanceLogix, eMoney Advisor and Money Guide Pro.

Utilize and Leverage and Intelligent Customer Relationship Manager (CRM)

Whether you started in the business six months ago or you are a 20-plus year financial services veteran, taking notes and staying on task requires the implementation of a client relationship manager (CRM). As you know, it’s very important to take notes and document client interactions, as these may be requested in an audit. Some financial professionals may have used what is known as a Rolodex file system and a note pad to stay organized. Today you can leverage the power of the next generation of CRM software. You will want to seek a service that is secure, cloud-based and easy to use in the office and on the road. The most common CRM solutions include Redtail Technologies, Salesforce and Junxure. Some of the more innovative “new kids on the block” are Wealthbox and Market 76.

Software Integration Is Critical

Regardless of what software and applications you choose to adopt in your practice, it’s important that these solutions work together like a team. Most firms offer a suite of core products that work well together. If you venture outside the fray, be sure to investigate the software’s integrations and available application program interface (API). In other words, you want to ensure that the software you choose will be able to easily “talk” to other applications you have or may eventually acquire. This will make life easier for you and your firm’s IT team.

Security and Encryption Must Be User-Friendly

Just like you have a key for your car and home, you must find a way to secure your clients’ online data. If you have physical paper files, you should consider scanning them with an optical character recognition (OCR) scanner and backing them up on an encrypted hard drive. Then, you’ll want to back the data up to a secured cloud service, such as Box, Dropbox, Onedrive, Google Drive or Egnyte. Lastly, you may want to utilize nCryptedCloud to protect your cloud data. You can learn more about nCryptedCloud in a previous NAFA Annuity Outlook article I wrote called “Solutions to Improve Your Online Security and Productivity.” In this article, I highlight how nCryptedCloud is a great digital file encryption solution for the non-IT person.

Ensure the Solution Is Audit-Friendly from Beginning to End

You probably have participated in a fire drill more than once in your lifetime. In an audit, regulators are simply looking to see the “fire drill” process and emergency plan-of-action. When utilizing any financial practice management technology that is endorsed by your firm, keep in mind that it has already been reviewed and checked for accuracy, integration and security. When you use a third-party, non-endorsed product, you will be responsible to show that you have a process in place should your system and applications experience a security breach. Regardless of how technologically “avant-garde” you decide to be in this heightened environment of compliance and customer suitability, take note that what is new today is old tomorrow. We must always aim to stay ahead of the curve, and forever be a student of technology and the industry. Just remember to keep calm and carry on.


Bryan Mills is a financial consultant who has been working with private investors for over two decades. Building on 20 years experience as an entrepreneur and producing broker he launched AdvzrTek, a practice management technology site designed to help other financial professionals. His mission with AdvzrTek, is to connect other financial service professionals with innovative and useful ideas, to enhance their practice and save them time. He can be reached at advzrtek@gmail.com or www.advztek.com.

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