Advice360° is a series designed to help advisors increase their productivity using our digital wealth management software.
In this installment, Steven Niedzwiadek, Advisor360°’s Product Manager for Compliance, shows financial advisors how our Personal Securities capability can save them time and keep them in compliance.
Monitoring the personal securities transactions of advisors and other firm employees is critical to complying with industry regulations and preventing conflicts of interest between the wealth manager and client. Advisor360°’s Personal Securities Reporting functionality not only makes compliance easier, but it can also help in-house compliance analysts spot red flags before regulators do.
The importance of personal securities disclosure
There are real-world implications for improperly reporting personal trading activity. Here are three of the primary reasons advisory practices need a sound personal securities disclosure program with the best supporting technology:
Conflict of Interest Mitigation: Fiduciary advisors must always act in the best interest of their clients. Full and timely personal securities disclosure helps keep the client’s interest at the top of the pedestal.
Regulatory Compliance: Regulatory bodies, such as the SEC and FINRA, require advisors to adhere to strict reporting standards. Failure to disclose personal trading activity accurately may result in fines and punitive damages.
Client Trust, Transparency, and Firm Reputation: Perhaps most important of all, openly disclosing personal investments fosters trust—which can promote stronger bonds between advisors and clients.
Advisor360°’s Personal Securities capability: A game-changer
Gone are the days of buying and holding investments for the long haul or relying on a sizable pension for a nest egg. Rather, the NYSE reports that the average holding period of stocks has fallen to just a handful of months. That’s not to say that all wealth managers are fast-money traders, but it’s reasonable to assert that more frequent trades are being made given today’s landscape. Thus, better technology is needed to meet bigger compliance challenges.
Advisor360°’s Personal Securities Reporting capability streamlines the disclosure process for advisors and empowers the back office to properly report issues that may come about. This comprehensive and user-friendly system integrates all facets of the personal securities reporting process, helping home office compliance teams identify potential concerns immediately.
Benefits to the advisor
There is no getting around the reality that a wealth manager’s financial life is under close watch by not only their employer, but also state and federal regulators. The last thing a busy advisor wants is a compliance issue over what might have been an innocent personal trade. Advisor360°’s Personal Securities Reporting capabilities streamline the disclosure process with functionality that saves advisors time while making it easier to report all accounts and transaction activity.
Better reporting: Saving advisors' time and ensuring accuracy. Disclosing a personal securities account is easy, fast, and simple. The system displays the account number formats for each of the 24 supported broker-dealers which helps to reduce reporting errors—the advisor doesn’t have to fret about missing a hyphen or using the wrong character for a dash symbol. This is a huge time-saver for the home office and advisor by preventing NIGO accounts before they occur.
User-friendly interface: Making personal securities reporting hassle-free. As the advisor fills out the page, the required fields dynamically change based on how the user answers the questions. This allows the user to only see questions that are relevant to their situation. They can choose from many different account types, including trust accounts that might have multiple trustees and more obscure private placement securities. Few other programs offer this, and it is a critical aspect of full disclosure. Of course, the disclosure fields are editable throughout the process.
Benefits to the back-office
A home office’s operational team must have the best tools to do their job of monitoring personal trading activity within the organization. Advisor360°’s compliance tools offer several benefits to the back office.
Automatic custodial feeds: Effective transaction monitoring. The platform supports automatic custodial feeds for brokerage accounts, streamlining transaction monitoring and conflict of interest checks. This daily feed enables timely spotting of potential conflicts between advisor and client trades. It immediately creates cases for compliance analysts to review, highlighting large trades, excessive trading patterns, and possible insider trading.
Quarterly transaction reporting: enhancing oversight for accounts without automatic feeds. For accounts not held in one of our 24 supported custodial feeds, Quarterly Transaction Reporting (QTR) alerts remind advisors to submit periodic statements as part of the oversight process. Back-office teams can then easily track outstanding tasks, monitor compliance metrics, and identify areas that require attention through intuitive analytics.
Advanced monitoring features: IPO tracking. Advisors are generally prohibited from participating in the primary IPO market. Advisor360° has a cutting-edge IPO tracking feature allows back-office analysts to retrospectively identify personal securities activities related to IPOs for up to six months after an IPO occurs.
Personal security search: A proactive tool for back-office investigations. The Personal Security Search feature enables the back office to create highly customizable reports. Users can set specific parameters such as security type, transaction amount, date range, and more, tailoring searches to address unique needs. This feature can be an integral part of risk management activities, supporting the identification of trends, anomalies, and potential areas for improvement before issues escalate beyond the organization to regulators.
Code of ethics annual attestation report: Simplifying compliance management. Our Personal Security feature captures all members of an organization who are required to attest yearly to the code of ethics policy of the company. The back office can export the data to Excel if an analyst wants to slice and dice the data, but it’s also easy to filter for advisors who have not completed the attestation on the page itself. We’ve found that managing this process can be quite time consuming across the industry, making our tool all the more valuable.
The bottom line
In today’s fast-moving financial markets and more complex client accounts, it’s vital to ensure proper compliance when it comes to an advisor’s personal securities accounts and transaction reporting. Advisor360°'s Personal Securities Reporting capability is a powerful tool to minimize potentially costly compliance issues before they grow. The capabilities make reporting easy for the advisor and empower the back office to investigate activities with more detail and speed than ever before.
Steven Niedzwiadek is Product Manager for Compliance and defines and oversees product features that improve broker-dealer, advisor, and investor performance and efficiencies in the banking, investment, and insurance industries.
Steven Niedzwiadek
