RIA Compliance and Practice Management Blog

Five ways compliance consulting can help your RIA firm

Posted by RIA in a Box

Mar 9, 2023 2:55:59 PM

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In the financial advisory industry, regulatory compliance is paramount. Registered investment adviser (RIA) firms and Exempt Reporting Adviser (ERA) firms need to adhere to a variety of regulations and laws, and failure to do so can result in significant consequences, including legal and reputational damages.

At the same time, compliance can be time-consuming and costly, especially for smaller firms that may not have the capacity to hire a full-time compliance officer. In many cases, those firms choose an internal candidate to assume compliance duties in addition to their regular responsibilities, which overloads their bandwidth and leaves opportunities for error.

That's why many RIA firms choose to work with compliance consultants, who provide expert advice and guidance on regulatory compliance issues. According to one recent report, 34% of firms reported outsourcing some or all of their compliance program. But what exactly is compliance consulting, and how can your firm leverage this expertise to enhance your regulatory compliance program?

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What is compliance consulting for RIA firms?

Compliance consultants are professionals who specialize in regulatory compliance issues. They are usually experts in a particular area, such as securities regulations, and can provide guidance and advice on how to comply with these regulations. Compliance consultants can work with a wide range of financial firms, including investment advisers, investment banks, hedge funds and broker-dealers.

The role of a compliance consultant is to help financial advisers understand and comply with regulatory requirements. They can provide a variety of services, such as conducting compliance audits, developing compliance policies and procedures and providing training to staff members. Compliance consultants can also assist financial advisers in responding to regulatory inquiries and investigations.

In essence, compliance consultants provide support in three general areas:

  1. Expertise on all compliance issues, from general to niche.
  2. Best practices for maintaining compliance within an RIA firm.
  3. Guidance on updated or changing regulations.

If your firm is expanding or has an otherwise decreased bandwidth, a consultant can provide cost-effective help during the transition.

Related: When is it time for your brokerage firm to bring in an outside compliance consultant?

What does a compliance consultant do for an RIA firm?

If you’re on the fence about hiring a compliance consultant, it can be helpful to visualize exactly how the consultant can benefit your RIA firm. Here are five common tasks a consultant can tackle, from conducting a compliance audit to providing training and beyond.

1. Conduct an annual review and mock audit

One of the primary roles of a compliance consultant is to conduct an annual review of a firm’s compliance program. These reviews are required by the Securities and Exchange Commission (SEC) and serve to identify areas of non-compliance, as well as create an actionable plan for the firm to follow.

In addition, a compliance consultant may conduct a mock audit, where the consultant will review the firm's policies, procedures and controls to ensure that they meet regulatory requirements. They may also conduct interviews with key personnel and review relevant documentation to gain a thorough understanding of the firm's operations. The consultant will then provide a report detailing their findings and recommendations for addressing any issues.

Annual reviews and mock audits can be time-consuming and shouldn’t be rushed. If your firm is short on time as your audit approaches, it may be worth hiring a third-party consultant.

2. Develop firm-specific policies and procedures

A compliance consultant can assist with the development of policies and procedures, ensuring that your firm meets regulatory requirements.

In these scenarios, it’s common for the consultant to work with the firm's management team to identify areas of risk and develop policies and procedures which address those risks. They will often also provide training and support to ensure that staff members understand and can implement the policies and procedures effectively.

3. Provide company-wide compliance training

Compliance consultants can provide training and education on a range of topics, including data privacy, AML, cybersecurity and more.

The consultant will likely work with the firm's management team to develop customized training programs tailored to the specific needs of the firm. For example, if your firm has a new CRM system, a consultant can help create a training guide for your employees that includes cybersecurity protocols.

They may also provide ongoing support to ensure that staff members are up to date with the latest regulatory requirements, such as the SEC’s newly updated Marketing Rule.

4. Assist during investigations and regulatory inquiries

If your firm does find itself in the hot seat with SEC or state regulators, or identifies areas of risk that could lead to a potential infringement, a consultant can help to identify proper next steps.

Regulatory inquiries and investigations can be time-consuming and expensive for financial firms. Compliance consultants can provide support during these processes, ensuring that the firm is well-prepared to respond to inquiries and investigations effectively.

5. Deliver timely guidance on changing regulatory policies

Lastly, compliance consultants can help firms stay informed about regulatory developments and provide guidance on how to comply with those new requirements.

The consultant will monitor regulatory changes and provide regular updates to the firm's management team. They may also provide training and support to ensure that staff members understand the implications of these changes and can implement them effectively.

Keep your compliance processes on track with the help of an experience compliance consultant – and enjoy the peace of mind knowing your firm is operating within regulatory requirements.

Want to discuss your situation with a compliance professional?  Click here to contact the RIA in a Box team.

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

Topics: RIA Compliance

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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