In today's fast-paced wealth management landscape, financial advisors connect with clients digitally via emails and texts. Given that an advisor may send or receive 50 emails per day, electronic communications at large firms can become staggering, easily surpassing 10,000 messages daily. The digital realm expands even further when one includes social media and messaging platforms like X (FKA Twitter) or WhatsApp. These channels are vital for attracting new clients, intensifying the need for comprehensive and compliant communication strategies to review and securely archive these messages.
From a regulatory perspective, compliance officers look to 17 CFR § 275.204-2 - Books and Records to be Maintained by Investment Advisers[1], part of the Investment Advisor Act of 1940, also known as The Act of 40. The term "written communications" echoes through The Act of 40, embodying the extensive scrutiny on maintaining a detailed record of interactions. Despite being written eight decades ago, today’s RIAs grapple with compliance; the regulations require that every email, text message, and social media interaction be reviewed and archived.
Regulatory Vigilance
With the ever-expanding use of technology apps beyond email and phone-based texts, non-traditional forms of advisor-client dialogue continue to evolve rapidly. All considered "written communications" under The Act of 40, these messages and even advisor-to-client video messages must be saved and available for review. Regulators must be able to conduct comprehensive oversight to identify if the advisor's fiduciary duty was not adhered to, as well as identify instances of misleading statements. The identification of customer complaints and adherence to a firm's Code of Ethics is also a requirement; it’s widely acknowledged that complying with this part of The Act of 40 is almost impossible. This difficulty is especially true as part of the requirements under Rules 17a-3 and 17a-4[2]of The Act of 40 contains an expectation by regulators that firms must be able to retrieve stored electronic communication from their archives.
Access to company emails, while challenging, is now more straightforward with the broader use of cloud-based email archives. Because of the scale and complexity of surveillance and analysis of electronic messages, most compliance organizations utilize some form of human-based message sampling to conduct reviews. However, the task becomes even more complex when introducing app-based messages on personal devices, and firms now must look to innovative technology solutions.
Equipping Compliance Officers
Compliance officers should have procedures, protocols, and technology tools in their “toolbox” to help ensure a successful and consistent oversight process. As the use of personal mobile devices for business is now part of the landscape in the advisory world, compliance leaders need to evaluate technology to analyze all forms of electronic communications. Lexicon-driven, highly customizable keyword and key-phrase-driven technology platforms designed for wealth management that integrate information from investor account records are now the must-have. Reliance on sampling and periodic surveillance is no longer regarded as a scalable way to comply with this part of The Act of 40.
SS&C’s Comprehensive Solution
SS&C solutions act as a firm’s strategic partner to help navigate compliance complexities. For example, SS&C’s Black Diamond® Wealth Platform seamlessly integrates with the SS&C Risk & Compliance Platform, also known as RCI. Together, these solutions cater to the needs of advisory firms and their compliance officers to provide a robust offering.
In early 2024, these solutions are launching RCI Digital Message Surveillance (DMS). DMS is a comprehensive advisor-centric email, text, and social media surveillance and archiving solution integrated into RCI and available via the Black Diamond platform. The new DMS module will include digital communication surveillance and archival, in addition to managing accounts, portfolios, and transactions to meet regulatory requirements.
Adding the DMS module within RCI combines financial account oversight with related conversations, simplifying compliance oversite. Designed to empower compliance professionals, this solution will cut through the noise and focus on actionable insights by reducing waste and duplicative efforts.
For more information on how SS&C can support your compliance needs, request your personal demo, call 1-800-727-0605, or email info@advent.com.
[1] eCFR: 17 CFR 275.204-2 -- Books and records to be maintained by investment advisers; https://www.ecfr.gov/current/title-17/chapter-II/part-275/section-275.204-2
[2] Books and Records | FINRA.org, https://www.finra.org/rules-guidance/key-topics/books-records
