Maintaining a compliant financial advisory practice has become ever more challenging in the wake of constantly changing regulations and an increasingly onerous regulatory regime.

As a result, many advisors are often frustrated with meeting compliance requirements while striving to build their practices, says Scott Plaskett, senior financial planner and CEO of Ironshield Financial Planning in Toronto.

However, it doesn’t have to be that way, he advises, noting that “you have to embrace [the task] and then determine how to implement the necessary processes to meet the requirements.”

Here are five steps you can take to ensure you maintain a compliant practice:

1. Document your processes
Documentation of your compliance processes is critical, says Vipool Desai, president of ARA Compliance Support in Toronto. This requires an “understanding of the concepts behind the rules [and documentation of] how you apply the concepts,” he suggests.

“There is a difference between following the rules and applying them” and you must be able to provide evidence that you do what your documented policies state, Desai advises. “[Regulators] don’t audit the compliance regime, [they audit] what you’re doing [based on your documentation].”

Meanwhile, Plaskett contends that some advisors are a bit more reactionary when it comes to documentation and recommends establishing a documentation process to ensure compliance requirements are met. For example, he has embraced technology to prepare dynamic document packages that meet compliance requirements for different types of products and clients.

2. Create a culture of compliance
Compliance should be everybody’s responsibility and not just the compliance department, Desai recommends. Adds Plaskett: “It has got to become part of your business.”

Desai suggests educating your staff about compliance requirements so they can ensure the rules are being followed at all times. He cautions that, often, small firms, in particular, might not have experienced in-house compliance staff who can deal with all situations effectively and recommends getting assistance from an experienced third party.

If you discover a compliance problem, such as a conflict of interest or a capital deficiency, you need to inform the regulators immediately. You will be better off doing so than trying to fix the deficiency. Although you might get away with “fixing a deficiency once in a while, if you’re caught the consequences can be serious,” Desai says.

3. Stay abreast within your operating environment
Keep abreast of changes to regulations and disciplinary rulings, Desai advises. One way to do this is to read the regulators’ annual review and survey, he says.

Furthermore, reading regulators’ disciplinary rulings can help you understand why they were issued. As a result, you might discover something that you need to correct in your own practice. The problem with this, Desai says, is that you normally find out after the fact although you do get the opportunity to bring your compliance processes up to date.

4. Maintain proper records
Make sure your books, records and know-your-client documents are always up to date as regulators focus on these documents during an audit. Plaskett suggests automating records, which provides easier accessibility than paper-based records. More important, automation allows you to create logs and checklists that can be useful in a compliance audit, he says. Note, though, that you should never alter documents or destroy records.

5. Budget for compliance costs
“You can’t ignore the cost of compliance,” says Plaskett, as it’s a cost of doing business. And even though the cost of compliance is increasing, it is unavoidable. Thus, your budget should either include the hiring of internal staff or the use of an external consultant.