In highly regulated industries like wealth management, the compliance department is often viewed as a barrier by many professionals. The nature of compliance – which exists to reduce and manage regulatory and legal risk – creates a natural tension with other professionals, especially those that generate revenue, such as advisors.
But that natural tension doesn’t have to result in a firm culture where the compliance department is viewed as a barrier. It is possible to develop a culture where compliance is considered a partner and maintains a good relationship with advisors, according to Courtney Haddad, Chief Compliance Officer at Concurrent Investment Advisors.
Haddad draws from her experience leading the compliance department at her firm in a compliance-as-partner culture and discusses the mindset, practical examples and steps to arrive at a collaborative approach rather than a compliance-as-barrier culture.
WSR: People often view compliance as a barrier rather than a partner. What mindset shift needs to occur for compliance to be viewed as a partner?
Haddad: They likely see it as a barrier because they are not engaging their compliance department, due to a preconceived notion that compliance professionals will say “no” to whatever they ask, but the reality is that every situation is different. Unless advisors have a partner in compliance that they can candidly converse with to better understand the circumstances surrounding a matter, they will always view compliance as a barrier.
Advisors have a preconceived notion that compliance professionals will say “no,” but every situation is different.
WSR: What does it look like for compliance to be about building trust and mitigating risk, rather than checking boxes? Can you give us a practical example?
Haddad: An example would be the branch exam process. Instead of going into an office and completing the traditional five page checklist with no conversation, collaboration or personal engagement – which is truly just checking the box – try a different approach.
During an acquisition at my firm we conduct a review of documents, client files, trade history, client suitability information and more in order to have meaningful conversations during the visit and to understand their practice and investment strategies, which in the end not only mitigates risk, but allows both parties to build an environment of mutual trust in understanding the model and circumstances of a particular situation.
WSR: How does a collaborative approach to compliance work? How do you ensure that professionals both on the business and compliance sides engage in collaboration instead of slipping back into an us-versus-them approach?
Haddad: It all stems from the culture that is built around compliance. Our advisors are not afraid to call the compliance department and have open communications expressing their opinions, ideas and concerns. Yes, we may have differences in perspective, however, in the end we have the same goal to meet our fiduciary duties and stay within the rules of relevant laws, regulations, and industry standards.
WSR: How do you work with an advisor who arrives from outside your compliance culture to get them accustomed to open and frank communication?
If the compliance answer is “no,” we provide the why, which shows our respect for the advisor’s perspective.
Haddad: We are not accusatory like many advisors are used to, and we encourage questions. I strongly believe our compliance department fosters and promotes a collaborative environment where the advisors feel comfortable asking questions. If the compliance answer is “no,” we provide the why, which allows not only understanding and transparency, but shows our respect for the advisor’s perspective. We definitely offer open and honest communication with our advisors and branch professionals.
WSR: What three keys would you advise to a CCO who currently is working in a compliance-as-barrier culture to switch it to a compliance-as-partner culture?
Haddad: First, a CCO must actively engage with senior leadership to advocate the importance of compliance and garner support for a compliance culture that is a strategic partner not a barrier. It must be supported from the top of the house. Second, compliance must establish a relationship with the advisors and branch professionals. I like to consider myself the velvet hammer.
Finally, education and training will increase awareness and understanding of the regulatory requirements and the importance of compliance. At least annually, my team conducts an in-person compliance presentation for advisors to meet the compliance team and establish a connection.
