Three ways advisor teams can boost compliance

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As advisors’ regulatory obligations increase, some are finding the team approach can help them meet their compliance commitments.
The Canadian Securities Administrators’ client-focused reforms, which took effect in 2021, increased advisors’ know-your-client (KYC) and know-your-product obligations regarding risk profiles and ensuring the suitability of investments, and also sought to weed out conflicts of interest.
To comply with these regulations, advisors need to file documentation at every stage of the client relationship.
What’s potentially helping regulators’ efforts is the industry move to an advisor team model that’s smaller, specialized and non-competitive, says Shawna Young, chief compliance officer at Verecan Capital Management Inc. in Halifax.
In addition to allowing for more holistic wealth advice, this approach ensures errors are identified and addressed, with team members backstopping and supporting each other.
“It works – it makes it really simple for everyone,” Ms. Young says. “And it’s absolutely what’s best for the client.”
Here are three ways advisor teams can improve compliance.
Maili Wong is competitive on the tennis court. But at the office, her goal is to ensure her team is as cohesive and connected as possible.
Ms. Wong, senior wealth advisor and senior portfolio manager with the Wong Group at Wellington-Altus Private Wealth Inc. in Vancouver, starts her day with a huddle in which each advisor on her eight-person team shares issues that need solving.
The team then brainstorms solutions, and there’s an awareness of what needs to be done to solve client issues, Ms. Wong says.
“Everybody then has a deeper understanding of each of our clients,” she says. “So, there’s accountability.”
The best way to eliminate conflicts of interest is to reduce incentives or bonuses for sales targets, says Zael Miransky, president and chief executive officer of MCO Private Wealth in Toronto.
He’s dismayed by firms that recruit constantly and force advisors to meet aggressive targets and bring on more clients, opening the door to unhealthy practices.
Instead, Mr. Miransky feels compensation should be unified across the team, meaning bonuses for meeting sales targets should be eliminated, with advisors earning the same salaries.
Verecan Capital Management has also decided to have each team member salaried, Ms. Young says. “If there’s competition within the team and it is set up to pit advisors against each other, that’s not in the best interest of the client.”
Advisors in a competitive environment may guard client information and be reluctant to let others work on a file. But a team model that shares responsibility for a client makes it easier to troubleshoot and ensure nothing falls through the cracks, Mr. Miransky says.
His team employs a buddy system in which each client document has a second set of eyes. “All these [oversights] are much easier to catch proactively as opposed to retroactively.”
A big part of KYC rules is the documentation. Ms. Wong says her team delivers those documents before they’re requested by the compliance officer during an audit, aiming to prevent issues before they arise. As the team serves clients collectively, each team member has the opportunity to flag anything that’s missing.
Compliance officers have the unenviable job of identifying and tracking mistakes; advisors who work closely with them can adhere to regulations better – and have better client outcomes.
“My door is always open,” Ms. Young says. “They come to me with questions when they need to clarify anything.”
Ms. Wong says her team has put a priority on working well with compliance.
“We have a healthy relationship in which we see inquiries as a way to help us make sure we can improve our processes and our systems.”
She believes smaller, holistic teams can drive growth, replacing the old-school advisories that pitted advisors against each other.
“What we found is that loyalty, teamwork and hard work are rewarded when you invest in these long-term, more collaborative, fully committed relationships – not just with clients, but also with the team,” Ms. Wong says.
Ms. Young agrees. “If [the team] is set up with a unified strategy toward working with their clients, then it can work very well.”
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