The new compliance

“Compliance really helped me build my case,” Quennec says, “and let me know exactly, step by step, how to deal with the client’s allegations.”

Quennec was able to walk away from that situation without fault and without any further regulatory or legal ramifications. He commends his CO for always stressing the importance of good record-keeping, including records of all client interactions, stating what was accomplished during each interaction and what each client agreed to as a result.

Although many financial advisors like Quennec are starting to see their compliance department as an ally, advisors in general have not always seen compliance professionals in a positive light.

Traditionally, calling your CO felt something like checking in with a parole officer. It was akin to dealing with an authority figure who might scold you for stepping out of line or prevent you from pursuing activities that could help you build your business.

Today, COs are making an effort to be regarded more as a resource than an obstacle, says Bryan Snelson, branch manager and portfolio manager with Toronto-based Raymond James Ltd. in Mississauga, Ont. The role of your compliance department, Snelson says, should be comparable to that of a personal trainer or dietitian – someone who provides advice and guidance to ensure you are on the right track and to help prevent encountering problems down the road.

“The role of the compliance officer has changed quite dramatically over the past 12 years,” Snelson says. “Before, it was always a case of them being reactive; today, they are being much more proactive.”

Snelson, who oversees a team of six advisors, encourages his team members to contact the compliance department whenever they are in doubt – no matter how big or small the question. In return, Snelson says, he has seen his compliance department become more responsive to queries, even setting up three-way conference calls that include the CO, the advisor and Snelson.

“An overwhelming number of regulatory changes have come down the pipeline, and they will continue to come,” Snelson says. “So, this type of advice [from compliance] allows the advisor to provide a much more precise explanation to clients on why we can or cannot perform a certain request, such as a specific trade or product offering.”

Building a relationship with your compliance department may seem like a daunting task, especially if you perceive compliance to be a roadblock with a sign that consistently says “no.” But finding a way to work together with compliance can be rewarding, both for you and for your clients, while strengthening your practice overall.

– COMMUNICATION

The key to working successfully with compliance – as with most aspects of any business – is communication. As in any relationship, the ability to communicate in an open and constructive manner allows both parties to see situations from all angles, says Ken Parker, chief compliance officer and chief financial officer with Portfolio Strategies Corp. in Calgary.

“Typically, a compliance officer hasn’t been an advisor,” Parker says. “So, [the CO hasn’t] had to go through the same kind of challenges that an advisor goes through on a daily basis.

“At the same time,” he continues, “we want the advisors to know why we [in the compliance department] have to ask the questions we are asking.”

Many frustrations arise, Parker says, when advisors have not been told exactly why a certain document or signature is required.

“I think advisors recognize that we are adding to their burden,” says Parker, who acknowledges that the regulators, in turn, add to COs’ burden.

“I certainly hear [advisors’] frustrations because the requirements aren’t always clear,” Parker says. “They are clear as to what [advisors] have to do, but not always clear as to why they have to do it.”

So, your CO can help you develop ways to explain to your clients why certain documents and information are required.

– GET TO KNOW YOUR COMPLIANCE DEPARTMENT

Putting a face to the name can be a good starting point for a better relationship with members of your compliance department. This will be easier in smaller, boutique firms. But advisors in large firms also can introduce themselves to their COs and describe their business models and their business objectives, says Betty Jo Royce, president of Toronto-based Queensbury Strategies Inc. and a member of the Toronto-based Association of Canadian Compliance Professionals (ACCP).

Quennec, for example, remains in contact with his CO on a regular basis – to the point that he is on a first-name basis with her.

“Compliance is here to protect me,” Quennec says. “I don’t see them as my opposition. I see my compliance officer more as a bulletproof vest. They can be restrictive at times, but that is far outweighed by the benefits they provide.”

COs, for their part, are shedding the reputation of being bureaucrats hiding behind their desks and are making efforts to be accessible. COs are participating in national sales conferences and local branch meetings and are setting up webinars to communicate with advisors.

“I have started to see compliance officers who are very active in the field,” says Snelson. “Not only with the advisors but also with our support staff, which allows the entire branch to gain a better understanding of the changes that are underway from a regulatory standpoint.”

– DON’T BE AFRAID TO ASK

When in doubt, says John DeGoey, vice president and associate portfolio manager with Hamilton, Ont.-based Burgeonvest Bick Securities Ltd. in Toronto, run it by compliance: “If you are not sure, or even if you are 99% sure, don’t be afraid to ask first. The old phrase ‘It’s easier to ask for forgiveness later than it is to get permission’ doesn’t apply in the compliance world.”

Perhaps you would like to run an advertisement that was approved years ago but you haven’t run since. Submit it again to ensure it is still compliant. Ask your compliance department: “This is what I want to accomplish with the advertisement; what would you advise?”

Ask COs directly for advice on how to market your business, set up social media initiatives or run a client appreciation event in a compliant way. The more direct your request, the more helpful they can be.

“We are always a resource first, and then we look to detect and correct,” says Manny DaSilva, president and chief compliance officer with Canfin Financial Group Inc. in Oakville, Ont. “It should be part of an advisor’s business plan to consult with us.”

And just because another advisor says he or she is allowed to do something, that doesn’t mean your firm has given approval for you to do the same. Issues such as social media, online client endorsements or manufacturers’ claims that certain products do not need dealer approval all should be checked with compliance.

– CHECK AND RECHECK YOUR PAPERWORK

COs often have to call advisors for minor omissions, such as details that are missing from submitted applications.

When using a form for the first time or completing a form that you have not used in a long time, Parker says, go over it line by line and review the details thoroughly before submitting it.

“It’s easy to miss a check box or a field when there is so much paperwork in today’s industry,” Parker says. “We know advisors don’t want to have to go back to clients; but if they miss something, it’s unfortunate, but we have to request it.”

– DOCUMENT ALL CORRESPONDENCE

Be sure to take notes and document all client interactions to protect yourself and your clients in case of an audit or an investigation.

“The only thing that saves you in the event of a compliance issue,” says Sandra Kegie, executive director of ACCP, “is what you have in writing. If it’s not in writing, it didn’t happen.”

– USE YOUR CO AS A RESOURCE

When one of Quennec’s clients found that automatic deposits made to an investment product from his bank account were being made daily instead of monthly, his finances were in disarray. Quennec determined that the error had been made by the product manufacturer and contacted compliance. Quennec is working with his CO in an effort to find a solution and persuade the product manufacturer to make good.

“I always view my compliance officer as the third person on my team,” Quennec says. “My job is to listen to my clients and understand their concerns. But I never react to the situation until I talk to compliance and know exactly what I can do to assist [the client].”

– READ THE MANUAL

It may seem redundant, but simply taking time to review your procedures manual may answer your questions and prevent issues with compliance down the road.

Familiarize yourself again with the dos and don’ts, whens and whats, says DaSilva: “It’s a worthwhile investment and can minimize a lot of the back and forth that happens between compliance officers and advisors.”

Check for pre-approved material or samples for advertising and marketing materials. If you want to produce your own content, use these samples as a guide.

A compliance checklist

A healthy relationship with your compliance department is key to running a successful practice, says Alain Quennec, financial advisor, associate portfolio manager and director with Rogers Group Financial in Vancouver.

The following checklist can help you benefit from a productive rapport with your compliance department:

– Document everything. Keep records of all client communications, as well as any communications you exchange with your dealer and your compliance department.

– Stay up to date on regulation bulletins. Be sure to read all notifications that are sent to you. If you are unsure about any changes, contact your compliance department for further clarification.

“It’s not our job to be experts on every detail,” Quennec says. “Your compliance department can help you understand the maze of rules the regulators have.”

– Review your procedures manual on a regular basis. You may find the answer to your question without having to send a request to compliance.

– Keep your dealer up to date on trade names and branch locations. If you run an independent practice, your dealer needs to know the details of your business. Failure to notify your dealer of changes can prolong even a simple request, such as an advertising request, because the dealer will have to register the new information with regulators first.

– Notify compliance on changes to your business model. Your CO cannot provide accurate assessments or advice if he or she is not kept informed about your business offering.

For example, if you change to a fee-only compensation model or have obtained a life insurance licence, be sure to inform your compliance department. Otherwise, approvals could be delayed.

– Fill out forms meticulously. Pay attention to detail. Leaving any boxes unchecked or fields incomplete could result in the document being sent back for clarification, thus delaying your client’s application.

– Pay attention to industry news. Although it is the dealer’s obligation to communicate new requirements to advisors, says Ken Parker, chief compliance officer and chief financial officer with Calgary-based Portfolio Strategies Corp., you can help yourself by reading up on industry trends and developments.

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