My parents are wonderful people who I respect very much. They instilled values in me at an early age that I strive to live by day in and day out, but beyond everything they taught me, I have an inherent fear of consequences or more specifically, getting in trouble because of something I’ve done. This is actually not a bad thing if you’re a compliance officer; I believe this type of fear is a perfect trait for those of us in that role. I also think most people assess their actions based on the severity of the consequences. For me, the most severe consequences are those that take away the things that are most important to me.
This fear of consequences has been with me since childhood, when there was nothing I wanted to do more than play baseball. To say I loved baseball is an understatement. Being allowed to play baseball was really pretty simple; all I had to do was obey my parents, respect the people around me, work hard in school, and stay out of trouble. Fortunately, I was successful in my quest to not have baseball taken away from me as a consequence of my actions. Eventually, what took baseball away from me was my acknowledgment of a lack of talent to make it to the next level…and I can live with that.
Fast forward to today. I’m still very passionate about baseball, but I’m also passionate about finance and helping people achieve all that’s important to them. Fortunately, I’m in an industry that allows me to pursue that passion on a daily basis as a wealth manager. While I don’t fear the consequences of my actions at work, I have a healthy respect for the “what ifs.” I also appreciate the much greater level of complexity involved in ensuring our firm runs a sound financial services business versus ensuring that I got to play baseball. Grown-up consequences are always more complex than those we face as children.
When baseball became competitive, beyond the little league years when every kid got to play and was given a trophy, I had to do two things to make sure I got to play:
Take care of everything that wasn’t baseball related, including making the necessary grades in school and staying out of trouble
Be good enough to make the team, and beyond that, be good enough to get playing time
If I didn’t “take care of business,” playing baseball wouldn’t have been an option. The financial services industry is similar. As wealth managers, we must:
Obey the rules and guidelines of the regulatory bodies (state regulators or the SEC)
Provide sound advice and quality service to clients and prospects to support growing our business
Anyone who doesn’t obey the regulations shouldn’t be able to provide financial advice to clients. The regulatory bodies continue to enhance their efforts to ensure that financial advisory firms are compliant. The best way for the regulators to go about these efforts is to examine firms to see if they are following the rules and guidelines. This is akin to Major League Baseball having an anti-steroids policy players must follow–but in our case, we don’t have to provide a urine sample.
The SEC has issued an initiative to examine firms three years and older that have never been examined. Our firm fit that description, and sure enough, we got examined. Examinations or audits strike fear in just about everybody, no matter how “perfect” they may be. When I found out we were getting examined, my fear of consequences kicked in, and it was impossible to avoid wondering, “what did we do wrong?”
Surprisingly, the examination experience was a very positive experience. The representatives of the SEC assigned to examine our firm were extremely professional. They communicated everything they wanted from us and the time in which they needed it by. They were also very responsive to clarify anything that had some level of question.
The two main takeaways I had from the examination process were:
1. Keep your business organized
2. Utilize support
Again, this can be equated to baseball, as franchises must be organized from the minor league level to the majors, and players will find more success if they take advice from support personnel like managers and coaches. At our firm, we use multiple technologies to keep organized, and this made the task of providing the SEC with the information they requested a much easier process. We use our CRM to maintain up-to-date lists of current and former clients, prospects, and other contacts, and to track the actions completed on their behalf. We use a rebalancing software to ensure that client portfolios stay in line with their investment strategy. We use cloud-based document storage to maintain client and firm documents. We use technology supplied by the custodians to feed the client accounts into the rebalancing software.
The purpose of compliance is to protect clients, and there are a lot of rules and regulations in place with protection in mind. As a compliance officer, it is my job to stay up-to-date with all of them, paying special attention to any rule changes. I find it never hurts to have a second set of eyes looking over everything–especially if that person specializes exclusively in the compliance of Registered Investment Advisors. Our firm uses a compliance consultant–our version of a coach– who works closely with me to review all firm documents and make sure we stay up-to-date with regulatory filings.
By leveraging technology and utilizing expert support, the task of compliance is much less daunting. Having compliance squared away lets me do what I’m passionate about–helping clients accomplish their goals–while putting my fear of consequences on the back burner and allowing me to play ball in an arena that provides me with great joy.
By Brooks Morgan
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