As unbelievable as it sounds, 40% of firms still use purely manual surveillance systems for compliance review.
How can an advisor be compliant without being fully digital? How can a Broker-Dealer protect the advisors they support and their clients if all that exists are verbal agreements and a manual paper trail?
Adaptability is the primary determining factor of survival. Those who have already partnered with leading technology firms will just have to make a call to add-on new solutions to keep them compliant. These firms will be able to effectively transition. This is true of this new rule and the all subsequent rulings to come. After all, the DOL Fiduciary Rule will not be the last legislation to come that requires Broker-Dealers or their advisors to modify systems and process.
In my opinion, a non-digital process alone could soon be perceived as negligent by the DOL when it comes to determining client suitability. Let me say that another way: paper & manual process alone will ultimately be non-compliant for suitability. How can I say this so definitively? With analysis of multiple products and strategies being critical to determining product and investment suitability, how can you prove proper due diligence if you do not have an efficient system to capture all client communications and provide the necessary checks and balances, much less access to the most up-to-date information? I don’t believe you can.
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