Over the past few years, we have interacted with thousands of registered investment adviser (RIA) firms. All of these RIAs come in different shapes and sizes. Some brand new with only one or two advisors and a few million dollars in regulatory assets under management (AUM), some have been established for years and have billions in AUM, and everywhere in between. During the initial few conversations with these firms, as we are getting to know more about their business, and they are gathering information about RIA In A Box, a very common question that we field is: what should I be asking you?
Now of course, this is not always the case. Many times when a firm calls an RIA compliance consultant, they have a very specific set of questions or needs in mind that need answered or solved. Strangely enough, however, many times a firm does not know what they need or what they should be asking. They feel they should be calling because of their lack of knowledge or information, and to start the conversation, they ask us, well, what they should be asking us.
There is really no right or wrong answer to this question. However, typically what we have found a good place to start is: what should I be doing on a day to day basis from a compliance standpoint? Now, obviously, this is a pretty loaded question, and it would be nearly impossible to answer over one phone conversation. Our general recommendation is to ensure that a proper ongoing investment adviser compliance program that is customized to the unique characteristics of your firm is in place. While seeking assistance from an RIA compliance consultant is by no means a regulatory requirement, properly establishing and maintaining a compliance program is a state and federal investment adviser regulatory requirement for investment advisory firms of all sizes. Often, the Chief Compliance Officer (CCO) of a newly established or fast growing RIA firm is being forced to fill multiple management roles and may not have an extensive compliance background. Unfortunately, even in such situations, regulators still expect to see the proper “culture of compliance” being implemented at the advisory firm.
A CCO can stay on top of the latest investment adviser compliance developments and requirements in a number of ways, and by no means is hiring a compliance consultant the only option to pursue; however, our RIA compliance experts often stress that “you don’t know what you don’t know”. Working with the right compliance consultant will help mitigate this risk. At the end of the day, regulators want to see that each firm is taking compliance seriously and has established a structured compliance program in which all members of the firm are properly trained and conditioned to conduct business in a compliant manner.
This is more of an observatory blog than anything else- in our conversations with so many investment advisory firms over the years, this has been a very common and consistent question when an advisor is first starting to look at how to properly tackle investment adviser regulatory requirements. Again, while there is no simple answer to the question of “what should I be asking you?”, or “what should my RIA firm be doing from a compliance standpoint?”, there is definitely a right direction that the first step should be taken in order to get on the right path to remaining compliant.