For financial advisors considering taking the leap to go on their own, it can be overwhelming to think about taking on all the roles that previously supported you.


You may feel like you’ve lost an army of people to take care of many things that were handled by your wirehouse, brokerage, support staff, or administrative team. Essential business functions like IT, marketing, legal, and of course, compliance.

Filing your Form ADV, keeping your registrations in order, and staying compliant with state, SEC, and FINRA regulations is a full-time job. As an independent financial planner and a business owner, you do not have the time to do it yourself — and if you do, it’s not the best use of your time. There are individual compliance consultants and professional firms that can assist you with this. 

If you think you can save some cash and do it yourself, it’s better to be safe and consider your investment the cost of launching a new business.

Mazi Bahadori, Chief Compliance Officer and VP of Securities at Altruist, shares his best advice for financial advisors looking to hire an outside compliance consultant or firm. Here’s what to look for in a compliance consultant or business.

First off, it’s important to get a complete picture of the potential consultant or firm’s background and experience.

Much like hiring an employee, it’s important to ask questions like, “how long have you been working in compliance?” or “what positions have you held?” or “have you previously worked at a regulatory agency?” And while these are all great (and necessary) questions, what you really want to uncover is the type of experience this person has and whether or not it lines up with the type of compliance consulting you need. 

Try to go deeper than the titles, prior employers, and even degrees or accreditations to make sure this person has the consulting background and experience that you are looking for. Depending on your niche or approach, it may also be important to find a consultant or service that specializes in compliance matters for firms of a similar size and registration type.

For example, a compliance consultant who mostly works with broker dealers is probably not the best fit for state-registered fee-only firms. In this scenario, it’s likely that most of the resources the consultant reinvests in their own business will be geared towards FINRA-registered broker dealers, leaving a smaller allocation for the remainder of their clients. 

While the consultant may be easily able to serve both types of clients, many times there tends to be a focus on larger SEC-registered firms since they have more revenue and can afford to pay higher consulting fees for services. More so, larger firms tend to have more compliance concerns which can bring in more revenue for the compliance consultant. 

So as you search for a compliance consultant, asking about their book of business can shine more light into their area of specialization. In addition, asking for references can also give you more insight into a person’s experience than a resume can.

Next, are they a cultural fit? Just like with any new addition to your team, any compliance consultant you’re looking to hire or contract with should be a good cultural fit. Far too often, financial planners bring on a compliance professional who looks great on paper, but when it comes to soft skills like communication styles, client or internal interactions, and relationship building, the person doesn’t mesh well with others in the firm. 

For example, perhaps you may have pinpointed a compliance specialist who is sharp and boasts a great resume, but has a greater appetite for risk than you are comfortable with. They may be willing to push the envelope of compliance, while you may be more conservative in your approach. Ensuring your risk profile aligns with your compliance professional can be part of a culture fit exercise as well.

Cultural fit is especially important for long-term growth in where both parties can develop a lasting relationship and, ultimately, grow together as the firm develops as well.

Compliance can be the great unknown and before going out on your own, you most likely had the support of a pretty large team and legal structure. And since compliance touches virtually every aspect of your business, the role is that much more critical when you decide to take the leap to become an independent financial advisor.

 

About Grow

Grow by Altruist is a show dedicated to bringing business growth advice to advisors, by advisors. I'm your host Dasarte Yarnway and each week I sit down with industry professionals as they share their best ideas around attracting new prospects, building a successful firm, and keeping clients happy. Watch more episodes here.