There has been a dramatic shift in financial advisors’ attitude toward their compliance departments over the past five years. Although ratings have remained steady year-over-year, compliance officers (COs) no longer are seen as burdensome as they once were. Rather, COs now are considered to be helpful members of the team who aim to keep advisors onside.

“They aren’t the bad guys anymore,” says an advisor in Ontario with Toronto-based ScotiaMcLeod Inc. “They’re totally approachable and reasonable.”

It wasn’t that long ago that advisors had plenty of unflattering comments about their compliance departments. In particular, advisors disliked how COs “got in the way” or stalled requests that previously had been approved quickly.

But as the financial services industry’s compliance regime began to shift — and tougher rules and regulations have been put in place — advisors have begun to realize that COs are not out to get them. Instead, COs now are viewed as a resource that can protect both advisors and their clients.

“They always want the little things done,” says an advisor in Ontario with Montreal-based Peak Financial Group, “but it’s
important because they protect us.”

Adds an advisor in the same province with Toronto-based Royal Bank of Canada: “I can call them if I am unsure about a product, and they will lead the way. It allows me to avoid compliance issues from the start.”

For Investment Executive‘s annual Report Card series, advisors were asked to give a rating for the “advisor’s relationship with the compliance department.” Since 2010, the average overall rating for the category has remained steady, at 8.8. The average overall importance rating advisors bestow on the category also has remained steady, at 9.0.

“Compliance is vigilant, and it pays off,” says an advisor in Ontario with Toronto-based TD Wealth Private Investment Advice. “The COs who are in-house keep an eye on everything. We are completely secure, with no chance of fraud or cheating. Compliance boosts client confidence.”

As a result, advisors now view their compliance departments as being extensions of their team. Advisors now aren’t hesitant in using COs as resource who can answer questions or concerns before client applications are submitted and complications arise.

“The compliance department is a partner,” says an advisor in Quebec with Toronto-based Richardson GMP Ltd. “They’re always eager to help and they respond immediately.”

Adds an advisor in Ontario with Toronto-based TD Canada Trust: “The compliance support we receive is wonderful. We have someone in the branch who guides and coaches us.”

Building these relationship takes time, and some advisors in the insurance sector are only just beginning to feel the pressure of increased regulations — similar to what the investment world experienced when the Mutual Fund Dealers Association of Canada was established in 1998. As a result, many managing general agencies (MGAs) are ramping up their compliance departments and informing their advisors about how these changes will affect them.

“[Increased regulation] is a good thing, as long as they’re careful not to overregulate,” says an advisor in Western Canada with Winnipeg-based Daystar Financial Group Inc. “Sometimes, the intent is good; but that gets lost if there’s too much of a burden on doing business.”

As a result of this new paradigm, independent advisors who work for an MGA were asked to rate their “MGA’s regulatory compliance” and their “MGA’s support in relation to the compliance regime” for the first time this year. Toronto-based World Financial Group Insurance Agency of Canada Inc. (WFG) received one of the highest scores in the latter category, at 9.3. That’s because, with the newly increased requirements from regulators, WFG has expanded its compliance staff in kind.

“That’s just part of the world we live in now,” says Richard Williams, WFG’s president. “We have a very open-door policy with our COs. Our field agents can call them directly at any time. We want to be a business partner vs a police officer.”

Kitchener, Ont.-based MGA Financial Horizons Inc., for its part, has a CO in each of its 22 branches to which advisors report — a business model that John Hamilton, the firm’s president and CEO, says is similar to the way the MFDA-licensed firms set up shop.

“We’ve been ahead of the curve on that, and it has paid off because we get very high marks from all the life [insurance] companies on how we do it,” Hamilton says. “We have so many checks and balances. But I do think the [sector] needs a little tightening up [when it comes to compliance].”

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