Need a Compliance Consultant? 3 Questions Your RIA Firm Must First Answer
As a Registered Investment Adviser (RIA), your clients are relying on you to manage and maximize their assets. But in order to properly deliver that service, you need to build a support team of trusted advisors and specialists who can advise, teach and assist you along the way. One of the unsung heroes on this team is your RIA compliance consultant.
Hiring a compliance consultant is not a luxury. Securities regulations are pretty complex and failing to comply with them can tarnish your firm's reputation and lead to costly fines down the road. Yet, many firms struggle alone with compliance-- starting with the firm registration process and continuing throughout the constant drumbeat of compliance audits and exams.
The reality is that keeping up to date with the newest investment adviser regulations is a drain on resources. If your Chief Compliance Officer has a full plate of responsibilities in your firm, then he or she may not always have the time to perform routine compliance testing and monitoring. Many RIA firms are also relying on outdated systems that prevent them from conducting quality, efficient compliance assurance.
This is where RIA compliance consulting steps in. Compliance consultants help the firm stay in line with regulatory requirements, and this gives the firm's leadership team more time and peace of mind to devote to prospective and existing clients.
Three Questions to Ask Before Hiring a Compliance Consultant
The process of selecting a compliance consultant should not be taken lightly since this decision can significantly affect the financial and operational health of your business. If your RIA firm is in the process of choosing a compliance consultant, here are three important questions to consider before agreeing to work with anyone:
Do they have experience working with your type of business? In this line of work, experience is vital. Aside from the number of years they've been in business and how qualified the staff is, the first thing you need to find out is if the RIA compliance consultant has enough experience working with your firm's business model. A compliance firm that gets most of its business from broker-dealers, for example, will probably not be the best fit for your SEC-registered company.
The next thing to consider is if the compliance consultant is well-versed in the specific regulatory environment in which you are registered and operating. Regardless of whether your RIA is registered with the SEC or with the state of California, Georgia or Main, you need to make sure that the compliance consulting firm has already worked with RIAs with the same regulatory obligations.
What level of service do they offer? You need to make sure that the compliance consultant firm you choose to work with has a level of service that will fit your needs on an ongoing basis. Here are a few points to consider:
How quickly will they respond to questions? If you have a time-sensitive issue, how much time will it take on average for the firm to give you an answer, and what happens if your contact person is away?
How much hands-on assistance do they provide to help answer questions and to review regulatory filing documents? Do they offer more comprehensive or personalized consulting services?
Is there a platform or portal you can access to review the work that's being done, update information or download documentation?
What other tools or resources does the firm offer?
How much do they charge, and how is the fee calculated? Even if you have a limited budget for compliance consulting, keep in mind the old saying, “you get what you pay for.” Though many quality firms have service packages priced for money-conscious RIAs, if a firm's services seem unbelievably cheap, then it could be a red flag that not everything is what it seems.
Keep in mind that there are many different pricing models in compliance consulting. There may be a set fee to register your firm, or you may be charged by the hour. In terms of on-going compliance, some consultant firms will charge an hourly rate, while others may have a monthly subscription fee. Some may have predefined service packages, while others may offer their services separately.
Above all, you need to make sure you're getting a fair deal with a transparent pricing system. This means taking the time to read the fine print so you are clear about the services being offered for the quoted price as well as any limits or restrictions that may exist.
In short, securities regulations are serious business, and as such, you need to make a serious effort to find and hire a compliance consultant who is best positioned to get the job done.