Two well-known names in fintech have announced new compliance solutions to help growing firms manage the rapidly evolving regulatory landscape.
Last week, Riskalyze launched a tool designed to help wealth managers of all sizes spot compliance red flags early across an entire book of business. The California-based company that provides portfolio risk assessment software to financial advisors introduced
First announced by Riskalyze CEO Aaron Klein last fall during the company’s annual
This week, compliance and cybersecurity software company
To make sure rollover recommendations are in the investor’s best interest, the DoL has established new requirements under
The goal of PTE 2020-02 is that “investment advice fiduciaries who rely on the exemption must render advice that is in their plan and IRA customers’ best interest in order to receive compensation that would otherwise be prohibited in the absence of an exemption.”
While the announcements from Riskalyze and RIA in a Box tackle very different compliance concerns,
As chief compliance officer for Wipfli Financial, a Milwaukee-based RIA with more than $5 billion in client assets, Bekasov said the evolution of these tools is “night and day” compared to when he first started in the industry.
He recalls the mid-aughts when then-startup
“Nowadays it’s more of a ‘smart’ technology, if you will. It’s technology that helps you monitor things. It helps you address issues before they become issues, or at least, deal with it when it becomes an issue instead of months from the occurrence when it basically becomes too late to mitigate any problems.”
That ability to stay ahead of the curve saves advisors time, firms money and provides tangible return to the end client. Bekasov said with expanding options to handle classic issues, it's an exciting time to be a compliance officer with a problem to solve.
He adds that firms who fail to properly leverage tech to address compliance matters before they become regulatory nightmares are destined to slip up.
“I’ve been doing regulatory compliance full time for 15 years now, and I can say with extreme confidence that modern-day compliance officers just cannot function without technology,” Bekasov said. “In my opinion, firms who refuse to embrace technology are doomed’ and that is not up for discussion.”
Command Center
Klein said the response to Command Center from pilot customers has been strong, and he looks forward to giving compliance teams “a new generation of tools to drive digital transformation in their businesses.”
He added that when it comes to identifying and addressing compliance problems as soon as they arise, the stakes are high.
“Even if advisors are absolutely doing the right thing, talking with the client and establishing those expectations of risk and what the client is comfortable with, we live in a regulatory environment where hindsight can create litigation and arbitration,” Klein told Financial Planning. “It's a lot easier for a financial advisor to be able to defend against some of those hindsight claims if they are able to, No. 1, demonstrate that they did go through a thoughtful process and document risk alignment between the client and their portfolio. And No. 2, demonstrate that they have an ongoing process to review those accounts and make sure they stay in alignment with the expectations they've set with the client. This is where Command Center comes in.”
“Compliance,” a feature within Command Center, has been deemed the cornerstone app of the platform. Officials said Compliance can be used to analyze every holding across a firm for efficient identification of misaligned accounts or households.
Holdings can be sourced from all major custodians including Schwab, TD, Pershing, Fidelity, LPL, Interactive Brokers, Raymond James and Apex. Technology platforms such as Orion, Envestnet, Tamarac and Black Diamond are included as well.
Firms can organize a book into a single domain to keep accounts together, or multiple domains to reflect the segments of their books that they want to manage separately, according to Riskalyze.
Klein said Command Center and all of its tools were developed with every size of firm in mind. From organizations with four to six advisors and hundreds of accounts, to wealth managers boasting thousands of advisors and millions of accounts, the platform was made to scale as you grow.
Klein said as an advisory business begins to scale, that is when inconsistencies with how different advisors engage with clients and document how they are helping clients stay in alignment can emerge.
The goal was to improve the management of advisory businesses and eliminate the “needle-in-a-haystack” hunts for problems that previously required hours of manual spot checking.
“And that's a really critical part of an advisory firm's responsibility., to document that they are having conversations with clients and establishing how much risk the client is comfortable with. Effectively Reg BI’s duty of care,” he said. “Markets are dynamic. They change and they move. So maybe the strategy that the advisor chose has kind of changed its course and is no longer in alignment with what the client is looking to do or what they're comfortable with. The Command Center is really that early warning system for these firms, large and small.”
RIA in a Box and InvestorCOM
Officials said RolloverAnalyzer is designed to support advisors making best interest rollover recommendations by comparing rollover environment against the current levels of service, client fit and costs; integrating plan and industry average data; electronically documenting and disclosing the best interest recommendation directly to the client; and providing native recordkeeping and oversight functionality necessary for compliance teams.
“The new requirements related to rollovers are no small undertaking, particularly for small to mid-size firms with fewer resources and smaller compliance departments,” RIA in a Box Senior Vice President of Product Development Michael Lubansky said in a statement. “RIA in a Box’s partnership with InvestorCOM will pave the way for advisors to continue making rollover recommendations and meet compliance requirements by the upcoming compliance deadline in July.”
RolloverAnalyzer aims to provide an intuitive digital option to supplant manual processes. Company leaders say financial professionals in need of a tech solution to complete rollovers can onboard to RolloverAnalyzer in under one business day.
“In general, RIAs and independent advisors face a greater challenge in meeting regulatory requirements. Not only do they wear multiple hats, but they also tend to rely on manual processes to meet regulatory requirements,” InvestorCOM Vice President of Regulatory Strategy Parham Nasseri said in a statement. “Through the partnership with RIA in a Box, RIAs have an opportunity to leverage intuitive technology to make best interest rollover recommendations and meet their regulatory obligations for PTE 2020-02.”
