Why You Should Engage a Compliance Consulting Firm

Engaging an RIA compliance consultant or service provider, or at least paying for it, is not an attractive option at first. There is a cost, of course, as there is for everything, and for many registered investment advisers (RIA) there is pressure to avoid unnecessary costs.

Compliance is often viewed as an extra expense, which is the opposite of how it should be viewed. In our world, the investment advisory world, compliance needs to be placed on a level equal to other operational aspects of running a business.

There are some compelling reasons why firms, both large and small, will benefit financially and operationally from hiring an RIA compliance consultant. The bottom line, literally and figuratively, is that engaging a professional RIA compliance service provider is almost always going to save money.

RIA Compliance Consultants Have Experience


There is virtually nothing that RIA compliance consultants have not seen or experienced. From issues small to large, from RIAs across the country, everything is nothing new.

That experience is invaluable. When a question or issue emerges, even the most talented and brightest Chief Compliance Officer (CCO) only has so much time.  And there is a good chance your CCO is “wearing other hats” or is being pulled in multiple directions.

RIA compliance consultants, on the other hand, see a wide variety of issues in an incredible variety of situations simply due to the breadth of clients with whom they work.


RIA Compliance Consultants Have Experience with Regulators


The idea of communicating with a regulator can be intimidating. One advantage of an RIA compliance consultant is the knowledge that your consultant does this all the time. They have experience answering regulator questions, knowledge of the regulatory environment and, most importantly, know why the question is being asked.  Again, it has all been done before.

An invaluable, and often overlooked, advantage to engaging an RIA compliance consultant is the ability to lessen the fear of a regulatory exam.


Engaging an RIA Compliance Consultant Saves Costs


Engaging an RIA compliance consultant often means facing costs in the tens of thousands of dollars per year, which might be considered expensive until you consider the potential costs of penalties, lost business, or the simple cost of having to hire a CCO.

There is a good and simple reason most small RIAs, and some large ones, do not hire a full-time CCO and instead relegate that duty to another executive officer. A full-time CCO is expensive. If there are additional compliance team members, that is an additional expense. And for many RIAs, a full-time CCO is not needed.

You can extend applicability of cost savings to the idea of hiring an internal employee to manage day-to-day compliance tasks and functions. Engaging an RIA compliance firm to manage your compliance tasks eliminates those human resource functions.  And many investment advisers don't have a dedicated human resource person.


RIA Compliance Consultants Bring Assurance


What is meant by “assurance”? In this context, assurance means the peace of mind that the service and work that is brought forth by a consulting firm is professional and expertly crafted.

We also mean assurance another way. When you hire a person as an employee, they are just that: an employee. An employee-to-employer relationship is much different than a business-to-business relationship. Engaging a consulting firm means you are dealing with someone who is also an entrepreneur, a business owner, and who looks at the relationship with you in the way you look at your relationship with clients.

The foregoing does not preclude the possibility that, once you engage an RIA consulting firm, that firm will always be with you. Nor does it mean that you can never find an invaluable employee. However, if the decision is made, by either party, to cease the consulting engagement, there is an assurance that, primarily from the RIA’s perspective, the end of the relationship will be conducted in a professional manner.

We will illustrate the concept like this: an employee can just walk out the door with little need or desire to look back. A professional service provider would never end the relationship in that way.


RIA Compliance Consultants Know How to Respond


Another advantage to engaging an RIA compliance consultant is the efficiency and speed applied to situations. That is because, as noted above, the compound experience has allowed the consultant to develop and implement the correct policies and procedures.

The best RIA compliance consultants not only quickly and efficiently develop and implement changes but can do so with little or no disruption to other operational areas of the firm. They just get it done. The mitigation of disruption within a firm is an infrequently discussed aspect of RIA compliance service providers.