Five Steps to Eliminating Conflicts of Interest
Where the business may have seen seeds of opportunities, the regulators will see fields ripe for conflict. This was the topic of our Compliance Breakfast Forum held on May 19th in conjunction with Compliance Risk Concepts. From this discussion, we have identified five key ways that firms can eliminate conflicts of interest and maintain a top-notch compliance program.
- Stop caveman compliance. Stop hunting for that email amongst your twenty-five archived folders.Read more here for why firms must use technology or sink in this new regulatory era. You need a system that can merge data from order management systems, human resources systems, expense systems, and outside broker accounts. Recent innovations in processing power, data storage, and software have accelerated data-aggregation, while improving accuracy. Now, compliance technologies can extract higher value, more actionable data faster and in real time, thus moving us out of the stone age of caveman compliance.
- Keep quality data. Stop gathering stale data from disparate systems and relying on IT scripts. The manually intensive processes of gathering data from different systems, scrubbing that data, and then publishing it in a format suitable for senior management and the regulators won’t continue to work. Keeping dynamic, clean, reliable data not only helps build a quality compliance dashboard senior management wants, but allows you to apply the business rules and reports that a robust compliance structure needs.
- Do not confuse process with technology. Make sure your processes are logical because you’ll only be making a bigger cave by automating a caveman process. It has become clear that a box of papers doesn’t work for two reasons: your firm doesn’t value compliance and your system has no logic. Relying on tools, like Excel and Outlook, will cost you precious time from your schedule. You will still conduct caveman compliance, hunting and gathering data from different folders, and will provide a good work out for your swivel chair. Using MS Office is not a system or compliance structure; it’s digitizing a box of papers. For more help on automating compliance see here.
- Do not fear. The cost and evolution of compliance technology is no longer a reason to put off automating. There are great third party systems available at a reasonable price with minimal implementation fees. It’s easier than ever to demonstrate that your firm values compliance. Instead of a paper box or homebrewed system, if regulators see something familiar, like our flagship product PTCC, they will instantly feel comfortable. In doing so, you’ll raise the level of discussion to how your system works at a conceptual level instead of digging into the nitty-gritty details of reports. See here for more on the benefits of compliance automation.
- Simply throwing bodies at a problem is not the solution. The solution requires you to take current resources and redeploy them to be more effective, and that’s something you can only do with improved technology. Build a business case for why throwing more bodies at routine tasks is not as effective (and more expensive) as automating these processes. Make a list of all resources used in data hunting and gathering. Some non-automated compliance officers have estimated that 90% of their time is spent on this. You will be surprised how big the cost savings can be.
Remember compliance is a not a competitive sport, it’s a collaborative service — a service that benefits your firm as well as the whole investment community. By taking the time to implement a cohesive and automated compliance program, you will be saving yourself a lot of trouble down the road. By following these five steps you will be well on your way to eliminating conflict.
