by Rebecca King
If you are like many of your peers, dealing with compliance and regulatory issues is not one of your favorite tasks. In fact, one in five advisers tell us it is the element in financial planning that provides them with the least amount of satisfaction in their job1 (the only reason cited more frequently is compensation).
In light of this, compliance software may seem very compelling. But where do you start, and how do you know which compliance software is the right solution for you? FPA and ActiFi are partnering to answer this question in the third report in the FPA-ActiFi Adviser Technology Series, sponsored by TD AMERITRADE Institutional. Even in advance of the report-free to FPA members and available online this fall-there are some key research findings that may help you make some initial steps toward a better and more efficient work day.
Saving Time and Money?
In addition to hoping that compliance software will prevent headaches, stress and frustration, you may wish to save time and money by using compliance software. Unfortunately, this may not be the case.
According to a recent FPA study2, advisers who use compliance software actually spend more time per week and more money each year on compliance issues than those who do not use compliance software.
This doesn't mean that you won't receive those benefits or that you shouldn't consider adding compliance software to your technology solutions. It does mean that you can't simply find and install a compliance solution and expect to save time or money. In other words, with compliance software, it is especially important to make sure the software is a good fit for your business and that you are implementing the solution effectively.
Questions to Ask
Before you embark on an exploration of available compliance software solutions, take some time to think through and answer the following questions.3
What are your business objectives? Answer this from the perspective of your overall business objectives, not your personal objectives or desire for compliance software specifically.
What processes do you currently have in place, and will those be affected or need to change if/when you adopt compliance software? By identifying these areas ahead of time, you can better evaluate the impact of the software on your business and the likelihood of saving time or money, and also ensure that you are prepared to effectively implement the software should you choose to purchase and use it.
What do you expect to gain from using compliance software? Be sure to consider your overall business objectives when you consider the benefits you want from compliance software.
What functionality do you need the software to provide to gain the benefits you want? If one of the benefits you expect is saving time filling out your annual ADV form, you will need a solution that has functionality such as pre-filling the ADV form based on data you are already inputting throughout the year.
How will you measure your/your staff's adoption of the software, and will you use incentives to encourage its proper use? An unexecuted plan is as helpful as having no plan at all, so think about how to execute the plan effectively in terms of software use.
Who will be in charge of evaluating and improving your use of the software? Assigning one individual with the responsibility of monitoring and evaluating the software will increase the likelihood of continued success.
If, like many other advisers, you want a better way to handle compliance, consider the information in this article and look for the upcoming FPA-ActiFi Adviser Technology Report: Compliance Software Edition, which can help you make a specific decision about what solution to use.
Rebecca King is the manager of the FPA Research Center. Contact her at Rebecca.King@FPAnet.org.
Endnotes
1. Nelson, Christina. 2010. "Career Satisfaction in the Planning Industry Put to the Test." Research Spotlight Q2.
2. FPA's 2010 Regulatory and Compliance study surveyed 337 advisers from Feb. 15 through March 1, 2010, and was conducted and analyzed by the FPA Research Center.
3. See more detail on these fundamental questions in: Segal, Spenser. 2009. "7 Essential Steps When Considering CRM." Practice Management Solutions (November/December): www.FPAPracticeManagement.org.
TD AMERITRADE participated as a custodian respondent and is the sponsor of the study. TD AMERITRADE is separate and not affiliated with FPA or ActiFi and each is not responsible for the other's policies or services, except to the limited extent that TD AMERITRADE participated in the study.
Learn More
Download the complete FPA-ActiFi Adviser Technology Report: Compliance Software Edition online at www.FPAnet.org/AdviserTechnologySeries this fall. In addition to the compliance software report, find reports on CRM and financial planning software. FPA members receive these valuable reports free of charge, courtesy of TD AMERITRADE Institutional.
| Time and Money Spent by Compliance Software Use | |||
| Don't Use Compliance Software | Use Compliance Software | Average for all Advisers | |
| Time Spent (all staff) | |||
| Less than 5 hours/week | 67.5% | 50.8% | 63.9% |
| 5-10 hours/week | 21.8% | 24.6% | 22.4% |
| 11-20 hours/week | 6.4% | 9.2% | 7.0% |
| More than 20 hours/week | 4.3% | 15.4% | 6.7% |
| Annual Compliance Expenditure | |||
| Nothing | 11.7% | 3.3% | 9.7% |
| Less than $500 | 17.3% | 3.3% | 14.0% |
| $500 - $4,999 | 44.7% | 49.2% | 45.7% |
| $5,000 - $9,999 | 10.2% | 14.8% | 11.2% |
| $10,000 or more | 16.2% | 29.5% | 19.4% |
| Source: FPA’s Regulatory and Compliance study, Feb. 15–March 1, 2010 | |||
