For many firms, the idea of hiring an outsourced compliance consultant or paying for outsourced compliance services doesn’t always seem palatable. After all, the cost of hiring outside contractors certainly isn’t low, and for many firms, especially when starting out, there is pressure to avoid unnecessary costs.
Unfortunately, compliance is often viewed as an extra expense, which is the opposite of how it should be treated. In this industry in particular, compliance needs to be placed on a level equal to other operational aspects of running a business. Fortunately, there are some compelling reasons why even the smallest firms would benefit financially from hiring a compliance consultant. At the heart of the matter is a simple truth: hiring outside consultants is almost always going to save money, both in the short term and in the long term.
1 — RIA Compliance Consultants See Unique or Rare Compliance Issues Regularly and Have Experience Addressing Them
As compliance consultants, we’ve seen it all — from the rarest problem to the most common, everything comes across our desk. We’re also members of a team, in an organization built purely to work on compliance for investment advisers all over the US.
That experience matters. When firms come across a compliance issue, even if they have an experienced CCO on their team, they may have had different resources at their disposal to tackle the problem. However skilled your CCO may be, one person simply can’t do it all, all the time.
That lack of resources can harm a firm. Even when everyone is doing their best, a small mistake can mean large-scale problems if it results in an enforcement action. Small firms, especially, can ill afford to make a single mistake, as they have little latitude to absorb penalties or the resulting loss of business that invariably accompanies regulatory action.
Outside compliance consultants, on the other hand, see a wide variety of issues in an incredible variety of situations simply due to the breadth of clients with whom they work. When you hire an outsourced compliance officer and bring them what is (to you) a unique issue, that same consultant may have seen that particular issue several times in that month alone. Not only that, but when they are part of a team, they have the resource of other experienced compliance experts to reference if they’re ever unsure.
Your firm can only stand to benefit from such experience, but that experience also implies another benefit — outsourced compliance officers have ongoing relationships with regulators.
2 — Outsourced Compliance Consultants Have Extensive Day-to-Day Experience with Regulators
Just the thought of having to communicate with a regulator, even when you know that regulator is easy to deal with and bears you no ill will, can be a frightening prospect for new (and experienced) CCOs alike. One advantage of accessing third party compliance help is the knowledge that your consultant does this all the time. They have practice answering regulator questions, and know what the regulatory environment and staff are like in your area.
That familiarity with regulators benefits you in two ways. First, the simplicity of being able to breathe easy under regulatory scrutiny, knowing that a meticulous, experienced, knowledgeable professional is representing your interests, and second, by saving you from having to navigate a difficult situation under the added pressure of having to deal with someone you don’t know and who isn’t on your side.
3 — Hiring a Compliance Consultant Costs Significantly Less Than a Full-Time CCO and Team
Hiring outside compliance consultants often means facing costs in the tens of thousands of dollars range, which sounds expensive until you consider the potential costs of penalties, lost business, or the simple cost of having to hire a CCO.
There’s a reason most small firms don’t hire a full-time CCO and instead relegate that duty to another officer — a full-time CCO is extremely expensive. Add to that a compliance team, and costs can start to get out of hand.
For many small firms, it’s simply unnecessary to hire a full-time CCO. Many firms just don’t need compliance help all that often. However, when a firm does have a compliance issue crop up, bringing on a full-time CCO doesn’t really make sense in a lot of cases, especially if the issue is one that can be resolved in a matter of weeks or a couple months.
All of this makes hiring an outside compliance consultant even more attractive. Even if a firm hires outside compliance once a year, that still falls far below the yearly costs of an in-house team.
4 — All That Experience Allows a Compliance Consultant to Implement Reactions to Regulatory Changes Much More Quickly Than an Internal Team
Another big benefit to working with an outside compliance consultant is speed. Because compliance consultants have so much experience dealing with common and rare regulatory issues over and over, they’ve developed clear procedures to follow when a compliance issue comes up and can implement those procedures quickly in a variety of situations. Those procedures are an invaluable resource they’re able to lean on again and again, as well as that team they’re a part of, with team members rich in experience handling a variety of regulatory changes.
Compare this to a CCO, who may or may not have the resources to tackle certain regulatory issues. They may be used to having certain resources at their disposal, or they’ve realized they’re getting stretched too thin to keep up with the fast pace of regulatory changes.
Leaning on the experience of a compliance consultant, or outsourced team of them, can help an overwhelmed CCO take care of their compliance needs without feeling perpetually pulled in 20 different directions. The best compliance consultants help to augment a CCO’s abilities, allowing them to respond quickly to new requirements and lead their company successfully through rule changes.
5 — A Different Set of Eyes Can Catch Mistakes You’re Failing to See
Finally, one benefit of working with outside compliance is the opportunity to have a different set of eyes looking over your operations.
It’s easy, when working at a single firm, to overlook problems because you’re so familiar with your own operations. You may have developed a blind spot to potential issues because, on first review, you missed a problem and haven’t thought you needed to revisit the issue. When you’re reviewing policies and procedures that you’ve written, you can’t objectively determine if they are clear, distinct, and cover what they need to. You know what you meant to say and what matters, and it’s hard, if not impossible, to review your own writing for ease of comprehension for others.
After all, that policies and procedures manual isn’t actually for you: it’s for your team.
Our compliance consultants will not only bring a fresh set of eyes to your firm, but will be looking for specific, recurring issues that are common amongst firms across the board, whether these issues are obvious or not.
If you’re in need of an outside compliance consultant, contact us today — the Core Compliance℠ team will work with you to identify any current or potential regulatory issues and to come up with a reasonable means of resolution or prevention.
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