5-minute Finance: Fortify Your Practice For Regulation Volatility

By BRAD ISAAC
For AdvisorNews 

Regulations are constantly changing in the financial services industry and should be taken seriously by every advisor. In fact, make one error and you could be deleted from the industry. Though regulation changes aren’t predictable, a firm foundation can make the shifts more manageable for your practice.

Proactive Risk Management

There are several processes you can proactively establish to mitigate future risk. For example, in my practice we have different client packages that range in tiers from bronze to platinum. Each tier represents the level of client investment and correlates to a value proposition developed by our firm, such as claims management. It’s important to clearly discuss each client’s unique value proposition with them. As individual life circumstances change, re-evaluate your client’s package and which tier they should be on. The goal is to ensure you are able to justify every fee  you’re receiving from every client if you are audited.

To further reduce non-compliance to regulations, consider an outside audit from a third party dealer group. I’ve found that an outside audit every six months provides us with an external gut check. This also allows us to strengthen areas of weakness we may have missed due to our daily exposure to the business.

Get The Right People Involved  

Finding the right staff may take a while, but it’s worth it. Look for those who align themselves with your goals and who genuinely care about others. Those are the employees who will want to make an impact on clients’ lives. They’ll take the necessary precautions and often go the extra mile to ensure your practice remains in good standing and delivers the most ethical service.

Be honest with yourself, know your weaknesses and hire those who have different strengths than you. Delegation of certain tasks can be a valuable time-saver, however you should regularly check in on those you’ve entrusted with responsibility. If you need to reassume certain responsibilities to ensure your business is up to code, don’t be afraid to do so. It’s unfortunate, but it happens to everyone. Good staff is hard to find, so if you need to outsource a function, such as paraplanning, do so.

Never Settle

Always strive to make your practice better than it was yesterday. Achieving that goal often originates with the small, day-to-day processes. While it’s important to establish evaluations such as biannual internal audits, you should remain consistent with daily processes such as note organization or client follow-up. Stay completely transparent with both clients and your staff to ensure they understand the reason behind everything you do. This will help your staff remain regulation-compliant, and your clients will find it easier to trust you. Regularly evaluate both your internal and client-facing processes and if there is anything not fully transparent, dispose of it.

Invest in yourself and your business by constantly absorbing as much information as possible. Encourage your staff to do the same. This will allow you to regularly implement new best practices. Take your employees to various industry events and share resources from associations like MDRT to further their understanding of sales and client value.

Remember What’s Important

At the end of the day, remember that nothing has changed with regard to what a client wants. They don’t care about their portfolio review or a regulation change. They care, instead, about you helping them reach their financial goals. The client is, and always will be, your number one focus. If you establish proactive risk management now, when regulations change, you’ll be compliance-ready. This will allow you to spend less time worrying over regulation changes and more time finding your client the right solution for their needs.

Brad Isaac, owner of Finstyle Planning Solutions, has been a financial adviser for 19 years.He is a member of the Financial Planning Association of Australia and a Lifetime MDRT member. Brad lives in Melbourne, Australia.