Achieving success requires an independent financial advisor to wear many hats. Beyond the core duties of maintaining clients’ investment portfolios, at times an independent advisor must also help their clients assess their situations and plan for their life goals, while also marketing themselves to build a solid book of business. All while staying on top of the latest news and trends in investment markets to be able to deliver sound advice to clients when it is needed. While juggling all these separate tasks, it can seem near impossible to focus on what is essentially the most important function for an advisor: adhering to the complex, stringent and constantly evolving rules of industry regulators.
L.M. Kohn helps alleviate some of the burden by keeping a close eye on the latest regulations and making sure its advisors stay on the right side of the rules. Overseeing this effort is L.M. Kohn compliance manager, Mike Bell. Mike has worked in the financial services industry for over 20 years, primarily in Compliance, Sales and Management-oriented roles. He has passed numerous examinations and is licensed in the state of Ohio. Mike recently discussed his position with L.M. Kohn, and all of the steps the company takes to assure compliance.
How would you describe the main function you perform for L.M. Kohn?
Speaking generally, we’re in charge of making sure that our policies and procedures are up to date with the latest regulatory rules, specifically with the federal regulators including FINRA and the SEC. We also have to make sure that our reps are aware of those updates, which we accomplish through monthly compliance bulletins with the latest regulatory updates and other relevant news, continuing education training, as well as hosting an annual compliance meeting to talk more in-depth about all the procedures that need to be followed to maintain compliance.
Our goal is to give our advisors the peace of mind that we are keeping them compliant with the everchanging rules and regulations, as well as free up their time so they can concentrate on what they do best – working with their clients. We also function as an internal resource, almost like a help desk for reps who have questions about compliance. And, as an additional level of security, we screen our reps’ business activities for anything they might have missed on their own.
How in-depth is this screening?
All the trades that every L.M. Kohn rep has made are reviewed on a daily basis. We use technology that helps us identify if a rep has charged too much commission or based a trade on too large a percentage of a client’s account, as these might contradict our policies and procedures or a client’s stated tolerance for risk. Additionally, we complete social media reviews to make sure our reps aren’t sharing or posting any unapproved content. Regulators have very strict rules against language that sounds too promissory or guarantees success.
Also, we monitor any outgoing correspondence including e-mail communications, as these can be loaded with potential risks. Beyond assuring that any articles or marketing materials that are shared are approved, email communications must include certain disclaimers and other legal language. We watch out for communications concerning outside business activities that could get them into trouble, and make sure that any client personal identifying information being sent is encrypted or sent securely for the client’s protection. Another step we take it to monitor the tone of client communications. If a client has a complaint, there is a specific process for reporting this to regulators. Failure to do so can result in large penalties.
Why is it important for advisors to give compliance the attention it deserves?
Failure to comply with regulations can result in fines in the millions, firms being shut down or advisors being permanently barred from the industry. On top of this, industry regulators also conduct periodic examinations, which is an all-hands-on-deck event requiring working closely with regulators to get them the information they need. They leave no stone unturned, and you’re never 100% sure when they’ll show up, so it’s absolutely essential to be certain you’re always following all the rules.
Compliance isn’t anything to be taken lightly and can be very time consuming. Independent advisors will find it much more efficient to partner with a firm with a clean track record of compliance, so they can focus their time on meeting clients’ needs and developing a book of business that fits their lifestyle.
To learn more about how L.M. Kohn can help you ensure compliance, contact us today.