For the past four years, Smarsh has released an Electronic Compliance Survey Report. The company, which offers a cloud-based archiving solution for financial advisors, has used the report to identify concerns and trends within the financial services industry.
Since compliance is a significant issue for financial advisors, there are several items from the latest report that anyone involved in this industry needs to know about:
Keeping Up With an Increased Number of Communication Channels
Over the past three years, the number of electronic channels that firms allow their employees to use for messaging has nearly doubled. However, compliance programs have not expanded at the same rate. Archiving is seeing similar growth with comparable lack of management. While more messaging channels are being archived, most firms don’t have a comprehensive archiving strategy in place.
In terms of what’s being requested, LinkedIn, instant messaging, text messaging, and Twitter are at the top of the list. Since the report found that compliance officers don’t expect the resources dedicated to this type of messaging to expand much over the next year, those in charge of compliance are looking for technical solutions that can help them stay on top of everything that requires management.
Text Messaging: Popular, But Often Lacking Oversight
You wouldn’t have to go far back to find a time when people laughed at the idea of using text messages for business purposes. But now that the majority of the population sends text messages on a daily basis, and it’s usually possible to send more than 140 characters at a time, a lot of people have become comfortable with the idea of using text messages for business reasons.
Currently, over 40% of financial advisors use text messaging to communicate with clients. While that percentage is likely to continue growing, both retention and oversight solutions are lagging far behind. In order for this issue to be properly addressed, firms need solutions that will allow them to correlate data from text messages in a way that will enable them to be integrated into risk-based surveillance programs.
Producing Data is Still a Challenge
53% of the registered investment advisors surveyed for this report said that they had concerns about their ability to produce data if it’s requested of them. 29% of BDs had the same concern. When both groups were asked about what specifically worried them about this issue, both said that it’s increased scrutiny/enforcement by regulators.
Since this is a topic that’s on the mind of many advisors, it’s worth knowing what the SEC has asked firms to produce during recent examinations.. In order of most requested first, the SEC asked for email, website pages, instant messages, Bloomberg/Reuters messages, social media, email marketing, and text/SMS messages.
While most firms are still facing challenges in terms of closing compliance gaps, this report does reinforce the need for financial advisors to understand how to effectively communicate through digital channels.