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Hosted Compliance Management Software Solution

Opinion Article

How Small to Mid-Sized Firms Can Have World-Class Compliance Management

By Brian Fahey, CEO

Investment advisory firms face tremendous challenges in addressing compliance requirements.

The costs associated with administering an effective program. The time needed for issue monitoring. The rapidly changing and increasingly complex regulatory environment. Demands from institutional prospects for proof of operational excellence. The need to demonstrate the effectiveness of programs to regulators.

Addressing these issues takes time, money and expertise. Maintaining an effective program can be difficult for even the largest firms, so how do small and mid-sized firms stand a chance when faced with all of these issues?

In the past, many small and mid-sized firms have looked to technology to provide a solution. Unfortunately, comprehensive IT offerings, to this point, have been cost prohibitive. Traditionally, smaller firms have appropriately focused their IT expenditure on the supporting investment process or areas where savings can be achieved in operational or product distribution/customer servicing. Also, because firms of this size often have few employees and consequently a relatively lower volume of compliance activities, the “systems” they employ have been paper, Excel, reminders in Outlook, etc. Smaller firms have not implemented in-house systems because these manual processes have not been sufficiently encumbering to justify the expenditure, but they can and do leave room for error.

A hosted solution over the Web can resolve many of these issues for smaller firms. Instead of building costly in-house systems, a specific solution can be built that meets the needs of the industry on an outsource basis. This would allow the costs of ongoing system maintenance and upgrades to be spread across the universe of users while implementation costs could be virtually eliminated. Additionally, smaller firms would have more flexibility in meeting their compliance needs through a “try-to-buy” model.

At most small to mid-size firms, employees responsible for compliance monitoring also have other key responsibilities that are critical to the firm’s core functions. CFOs and CEOs, for instance, also function as chief compliance officer in many smaller organizations. Automation allows these valuable resources to be redirected to activities that support the firm’s main business objectives.

One thing wealth management firms can be sure of is that increased regulation of both the public and private financial services sectors, whether mandated or self-imposed, will continue to rise. SEC examinations are becoming longer, more detailed and more comprehensive. As a consequence, the risks associated with non-compliance are rising exponentially. The financial implications as well as the reputational ones can be daunting for any firm, but for smaller and mid-sized firms, they can be devastating.

In response to this threat, small to mid-sized wealth management firms are seeking effective, flexible and cost conscious compliance solutions that provide real business value and some insurance against litigation and growing fines. An automated, web-based, hosted compliance management solution can provide these firms with a affordable access to the expertise and flexibility needed to respond to this rapidly changing regulatory environment. Such a solution could allow customers to avoid substantial upfront capital expenditures in technology and other infrastructure related to creating and maintaining in-house solutions, freeing up time, resources and money that then can be redeployed in support of the organizations core functions.

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