Insights

In investment circles, compliance involves more than just obeying laws and regulations; it represents a commitment to operate under a set of moral principles that guide decision-making. Always acting with integrity is a core value for Fidelity Clearing Canada. Building trust and confidence into every relationship and every transaction is a key part of how we do business.

Paige Wadden, FCC’s Chief Compliance Officer, recently shared some tips for advisors for embedding rigorous compliance protocols into their day-to-day operations and minimizing the risk of inadvertently compromising their ethical standards.

1. Establish clear processes with assistants

Administrative assistants are the unsung heroes of many investment firms, working behind the scenes and supporting advisors with an array of administrative tasks. Every advisor wants to feel confident they can trust their assistants to perform their jobs competently and with integrity, and it’s neither desirable nor feasible for advisors to be constantly looking over their assistants’ shoulders.

Being too “hands-off” isn’t a good idea either, however. The following scenario illustrates what can go wrong:

An advisor’s assistant was periodically making changes to account opening documentation after clients had signed them and then initialing the changes. This went on for some time before an eagle-eyed auditor noticed the presence of identical initials within multiple client documents. Unfortunately, the advisor was held responsible. He received a regulatory fine and was placed under supervision, even though he wasn't aware of his assistant’s actions or involved in any way.

“This example underscores the importance of establishing clear and transparent processes at the beginning of your relationship with your assistants and implementing compliance checks and balances,” notes Wadden.

To avoid such situations, she recommends that advisors:

• Ensure their assistants have a clear and common understanding of what is and isn’t permissible.
• Stay sufficiently close to the daily administrative tasks undertaken in their offices by people acting on their behalf.
• Conduct periodic spot checks.

“Proactively establishing solid processes will go a long way to avoiding pitfalls and missteps, whether those are honest mistakes or more nefarious behavior.”

2. Work with – not against – your compliance officer

Despite their best efforts at maintaining the highest standards of honesty and ethics, many advisors will, at some point, find themselves in the uncomfortable position of having the firm’s compliance officer take a closer look at their book of business. 

According to Wadden, it’s vital to avoid becoming defensive or justifying missteps. “If you demonstrate your willingness to cooperate with your internal compliance department (or an external regulator, for that matter) with their inquiry or review, your chances of getting the issue swiftly resolved will be greater,” she says.

In addition, Wadden recommends that advisors be proactive about seeking clarity and advice from their compliance team, treating them as friends rather than foes.

“For example, if you’re planning a new round of client email marketing outreach, make sure you’re clear on what you’re legally allowed to claim or represent. A simple misstep like rounding a benchmarking data point up or down could get you in hot water.”

Wadden also recommends that advisors regularly seek advice from compliance teams on:

• Steps for mitigating emerging cybersecurity threats.
• Cyber-compliance best practicesⁱ.

3. Stay alert to potential conflicts of interest

Today, conflicts of interest are on the radar of every regulator and compliance department. Advisors need to stay alert to unwittingly creating conflict of interest situations.

For example, it’s not uncommon for elderly clients to request that their financial advisor act as the executor of their estate when they pass away. That’s something advisors should never agree to, as it would constitute a serious conflict of interest.

Equally, if an advisor were to do something as simple as borrowing $1,000 from a parent to help pay for their child’s wedding, it would constitute a conflict of interest if the parent was also one of the advisor’s clients.

Summing up

Regardless of how big or small their book of business is, advisors have a responsibility to ensure they understand the “mechanics” of the day-to-day work that goes on in their offices.

“Every advisor could use more time, but no matter how busy you are, you have to make time to ensure you – and everyone working in your office – is prioritizing compliance,” cautions Wadden. 

“By establishing best practices, implementing some simple checks and balances, and working cooperatively with your compliance team, you can minimize the effects of compliance gaps, risks, and blind spots.”

When it comes to simplifying your work and driving growth and scale while adhering to best practices, Fidelity Clearing Canada (FCC) is the custody and clearing services provider of choice. By combining a people-first consultative approach with the right customer experience resources, operations, capacity, and innovative tech-forward product solutions, we help your firm automate, elevate, and accelerate — while ensuring a better experience for all stakeholders.

You know you can rely on Fidelity for its global strength and stability. FCC’s deep financial expertise, wealth of experience, and unwavering commitment to both your and your clients’ success ensure we deliver secure and reliable services you can count on.

Watch the interview with Paige here.

Contact us to learn more.