FROM THE BLOG
Advisors and Compliance: Working Together
Posted by Prospera Financial on February 4, 2025
As Prospera’s chief compliance officer, one of my responsibilities is ensuring that the firm adheres to all regulatory requirements while fostering an environment that promotes business growth. However, achieving this balance requires more than just implementing policies and procedures—it requires a strong, collaborative relationship between financial advisors and the compliance department.
This blog will explore how financial advisors can build a constructive and mutually beneficial relationship with the compliance department. When advisors and compliance teams work together effectively, it not only helps mitigate risk and ensure compliance but also sets the stage for business growth and long-term success.
At its core, the relationship between financial advisors and compliance teams is built on a shared objective: to provide clients with the best possible financial services while adhering to regulatory standards. This collaboration can help both sides achieve their goals:
- For financial advisors: Compliance provides the framework within which advisors can confidently offer advice, products, and services without fear of legal or regulatory repercussions.
- For compliance teams: Advisors are on the front lines, and their insight into client needs and market trends can be invaluable in shaping compliance policies that support the firm’s objectives without stifling growth.
When the relationship between these two groups is strong and transparent, it can lead to:
- Reduced Risk: Proactive identification and mitigation of potential compliance risks.
- Increased Efficiency: Clear communication and streamlined processes to allow advisors to focus on client relationships and business growth.
- Stronger Compliance: Advisors who fully understand the “why” behind compliance policies are more likely to follow them and incorporate them into their daily practices.
- Business Growth: With a compliance team that is viewed as a partner rather than a barrier, advisors can feel more empowered to innovate and explore new business opportunities within a compliant framework.
Key Principles of a Strong Advisor-Compliance Relationship
- 1. Open and Transparent Communication
The foundation of any successful relationship is communication. Financial advisors should feel comfortable reaching out to compliance teams or their designated supervisor for guidance, whether they have a question about a specific regulation, a new product, or client-related concerns. Likewise, compliance and supervision teams must be approachable, making themselves available to offer advice or clarify any compliance-related issues in real time.
- 2. Education and Training
Compliance is a dynamic field, and regulations are continually evolving. Financial advisors need to stay informed about the regulatory landscape to avoid inadvertently stepping out of bounds. The compliance team should offer ongoing training and educational resources to ensure that advisors understand the rules that apply to their work.
Additionally, advisors can play a role in keeping compliance informed about the latest client trends or industry shifts. This can help compliance teams adopt policies to support new business models while still managing risk effectively.
- 3. Partnership and Support, Not a “Gotcha” Mentality
Financial advisors often see compliance as an obstacle or roadblock to success. However, when compliance teams act as partners rather than enforcers, the relationship becomes more positive. Compliance should be seen as a resource—an ally who can offer advice and work with advisors to find solutions that meet both business and regulatory requirements.
When compliance professionals focus on educating advisors rather than penalizing them for missteps, it fosters a culture of collaboration. Advisors should feel that they can approach compliance for help in navigating gray areas without fear of reprimand.
- 4. Clear and Practical Policies
While compliance departments are responsible for ensuring that the firm follows the rules, it’s equally important that the policies and procedures they implement are clear and practical for financial advisors to follow. If compliance requirements are perceived as overly complex or disconnected from the realities of advising clients, it can lead to frustration and non-compliance.
Work with advisors to ensure that the policies in place are clear, actionable, and focused on key areas that impact client outcomes. Rather than enforcing blanket policies, compliance should aim to create guidelines that are aligned with the firm’s business model and the regulatory environment.
- 5. Proactive Risk Mitigation
One of the most valuable contributions that compliance departments can make is identifying potential risks before they become problematic. A proactive compliance department will work with advisors to assess new business opportunities, products, or services for compliance risks and provide guidance on how to proceed safely.
By collaborating on risk assessments and staying ahead of potential challenges, both compliance teams and advisors can ensure that business growth does not come at the expense of regulatory compliance.
Conclusion
In the fast-paced world of financial services, the relationship between financial advisors and compliance teams is more important than ever. By fostering open communication, providing ongoing education, working as partners, and focusing on practical solutions, both sides can mutually benefit. This collaboration helps mitigate risk, ensures compliance, and ultimately positions the business for growth and long-term success.
A strong advisor-compliance relationship is not only an asset—it’s a critical element in creating a firm that thrives in an ever-changing regulatory environment.
Until next time,
Shawn Baxter, CAMS, IACCP®
Chief Compliance Officer
