EAssistLLC.com: RIA/IBD Operational Support and Compliance Blog

In the July issue of Wall Street & Technology, our CEO, Ted Tsung has a featured article (click here) on how to approach technology as a solution to your compliance woes. The article includes helpful formulas to calculate your cost/benefit analysis of automating administrative tasks:
% of admin tasks that can be automated x # of support staff x average staff cost/year = staff reduction savings

Determining your potential growth through additional producers:
% of admin tasks that can be automated x # of producers = # of additional producers that can be supported by existing staff

And your potential increase in gross revenue:
# of additional producers x firm’s annual earnings per producer = projected increase in gross revenues

Ted concludes by offering the following tips for selecting and implementing an automated technology approach that will address your compliance needs now and into the future:

1. Review your updated Written Supervisory Procedure (WSP), if you can still lift it, and seek a platform that can address everything that’s in there now and support everything that will be added for years to come.

2. Ask questions about flexible and expandable technologies that are “future-proofed,” and be sure to find a platform that can be updated and customized on demand to suit your changing needs and the endless list of new regulations.

3. Get commitments up front. Perhaps most important, make sure you work with someone who is able to perform a review of your WSP and ascertain the minimum percentage of your current compliance tasks that can be automated. As indicated in the models above, this is the single greatest factor in calculating your cost/benefit analysis.

4. Seek CRM integration. Make sure the new platform addresses CRM or can integrate seamlessly with your existing programs. Ideally, you want a soup-to-nuts automated solution for integrating your back-office data, compliance tasks and client records through a single platform.

5. Demand an implementation plan to ensure rep adoption. All too often this gets ignored. Your new system is only successful if your reps use it. Put the onus on the organization that develops your platform to help you market it internally. Ensure there are communication processes to explain the benefits and procedures to internal staff, broker-dealers and reps. Focus on those processes that engage the producers and make them want to use the solution. A good example is building order processing into the solution, linking producers’ earnings with system use. Make sure all your people are trained on the platform, what it can do, and how to monitor and fine-tune it over time. Finally, be sure to include a feedback loop so the product can be effectively and continuously improved.

One of our clients recently completed a month long FINRA audit where they asked to see the check blotter and procedures. Unfortunately the existing manual processes where not adequate. E*Assist created a bespoke blotter in days that allowed reps and home office to store and track the progress of every client check. Development was so swift that the new capability was shown to, and signed off, by the regulators mid audit. E*Assist brings the advantage of real-time enhancements, something that is becoming increasingly important in today’s regulated markets.

Absent any modifying agreements between a firm and a rep, in most states, clients’ personal information is the property of the firm and the firm is responsible for protecting it. But how much do you really know about your client? In many firms, reps hold client data in flimsy databases that lack broader access and protection against theft, fire or computer crash! E*Assist’s web-based CRM allows all client data to be held in a protected, hosted and backed up environment that allows both rep and management to view client records and overall books of business. Reg S-P could be yet another reason to consider automating your company’s data from back-office through to client records.

The imminent implementation of Regulation 2821 affecting the sale of variable annuities has many compliance teams searching for viable solutions. Unfortunately the recent market turmoil has CEOs looking to hold or cut costs, complicating the building or buying of effective 2821 solutions.
E*Assist’s low cost platform allows many of the compliance tasks incorporated in a firm’s written supervisory procedures to be codified, including 2821, which removes the need for large support teams to chase reps and brokers for documents. Such a level of automation would allow your firm to dramatically improve its producer/support ratios, something CEOs love hearing.
E*Assist addresses FINRA’s concerns over the monitoring of variable annuity sales though a series of easy-to-learn and use features. Imagine that at the touch of a button you can print your firm’s deferred variable annuity disclosure form complete with the relevant client’s information rather than having to rely on the rep to manually enter them on a blank VA disclosure form. You can also track the date the order/check was received, the date the documents arrived at the OSJ/Home office, the date of the review/approval and the date of the forwarding to the insurance company - all in one easy-to-use order management form. Summaries of progress through each of these stages are available through a variable annuity blotter and a check received blotter, again, all at the touch of a finger.

Progressive firms make every effort to minimize overhead and support costs. But with ever more stringent regulations, demands to hire more support and compliance personnel keep increasing. Firms are throwing away hundreds of thousands of dollars in inefficient and wasteful manual procedures that require more support heads than are actually needed.
In order for firms to achieve profitable growth, it is critical that senior management take the time to study this dynamic. Instead of taking a piecemeal approach and hiring one more head here or setting up one more standalone system there, time taken now to review the savings to be gained through automation could result in enormous benefits.
E*Assist has developed a complimentary proprietary process to help firms understand their cost containment potential.
The first step is to understand which of your firm’s manual processes could be fully automated. After signing an NDA to protect confidentiality, we create your E*Assist automation score by analyzing your current written supervisory procedures and determining which of these can be automated.
Our proprietary financial model then illustrates the potential productivity gains and/or the opportunity to hold or trim support expenses.
Existing E*Assist clients have seen cost and headcount savings measured in hundreds of thousands of dollars.

Removing the need for a rep to fill out a form manually is well understood. Popular form filling software, while expensive, helps to ensure that all the relevant fields are completed, which helps to remove the risk of rejection due to missing data or illegible handwriting.
But is this enough in our fast moving industry? Form filling 3rd party applications automates part of a reps’ workflow, but what about all those internal forms? And where is the completed application filed?
What reps really need is a process that seamlessly drives both external application form and home office internal form completion to the reps’ client database. So, irrespective of whoever created the form, the software completes all the required fields and creates a final copy that can be printed. The missing link is then to automatically save an electronic copy into the respective client’s master record. From the reps standpoint, there is one workflow to learn and no additional filing effort to complete. The added bonus is that the home office compliance team can access the client’s master record and attached application copies at anytime.
All forms and applications can now be completed with one click, reducing errors and mistakes. Plus, there are no additional fees to pay! Automated form filling is a standard capability in E*Assist’s complete business platform.

Building deep client relationships requires extensive communication and email is a profoundly important communication channel. But it comes with inherent limitations and surveillance headaches. Firms are mandating the use of popular email tools such as Outlook, but these tools often lack an easy way to automatically customize emails to specific clients. This leaves brokers and advisors with no choice other than to manually edit each email they send to a specific client, which takes time and can lead to mistakes. A more systematic solution would be to deploy a single platform to manage the mass / blast emails. Such an engine needs vital capabilities. Firstly, it has to be tightly integrated with the client database to provide the accuracy and customization required. Secondly, it needs a process that allows the compliance team to approve the email content, which are then saved into a master template. Thirdly, a record of each email sent should be appended to each client’s master record to provide an audit trail of past correspondence. Lastly, the platform must be coupled to the firm’s surveillance engine to ensure relevant oversight.
The E*Assist platform easily accommodates all of these requirements and top producers are currently using it to drive their outbound communications with excellent results.

A panel of independent brokers/advisors at SIFMA’s May conference in Chicago highlighted a key business concern. In many cases the BD/IA’s business is the individual’s largest asset – bigger than their house or retirement fund. This makes protecting it all the more important such that when it comes time to sell, the most preferential valuation can be achieved. Several anecdotes highlighted examples where a seller had done little to organize their books and records, making the process of demonstrating its value all the more difficult.
Another concern was the threat of litigation from a disgruntled heir or relative. With little to no systematic documentation of the past client relationship, the advisor/rep has few quantifiable tools, data or evidence to demonstrate the effectiveness and relevance of advice given in the past.
Technology has reached a point where both of these key concerns can be addressed in large part. With a master client record at its heart, any information or action relating to a specific client can be effortlessly appended to this master record. These data can include emails sent to or from the client, records of products sold (such as variable annuities) with the home office approval, past asset performance, scanned images of any documents such as wills, attestations or applications. The list is literally endless.
Over time, a system such as E*Assist builds into an invaluable record of your client base. This can be easily passed over to the appropriate successor, helping to ensure a seamless transition and further demonstrating the professionalism of the particular franchise.
This also provides an opportunity for home office broker/dealers and investment advisory firms that are struggling to offer a differentiated solution set for their independent agents. There are few better ways to build demonstrable value of your agent’s business than a systematic record of their client servicing history. Offering a platform that helps the agents retain and grow their client base on a daily basis while quietly building an invaluable record of the business is both truly valuable and surprisingly rare!

Explaining complex financial concepts to investors is never easy, especially now that regulators are also looking for more evidence of suitability. This is forcing home office and compliance teams to be equally demanding, which can delay or even prevent a sale.
The challenge facing registered representatives includes showing a remote & perhaps skeptical compliance officer that a particular 1035 variable annuity exchange or asset allocation switch is beneficial for a specific client. The same evidence could be required several years later if FINRA asks for evidence during their biannual audit. This all becomes even more complicated should an irritated heir start to question the original sale that may be decades old.
One solution is to emulate the practices of large wirehouses where calculators are used to allow a rep to compare products. The results can be saved for discussion with clients, OSJs, regulators and heirs as and when needed. But many mid to small firms do not have the IT resources to develop these tools.
E*Assist has responded to this need with a series of complimentary sophisticated investment and financial calculators to help independent registered representative and RIAs.
Users can:
• See the cost-benefit analysis of switching from one variable annuity to another potentially more lucrative VA product (1035 exchange)

https://sales.eassistllc.com/sales/va1035.php

• Determine the best product for your clients that are new to variable annuities by comparing the financial benefit of two proposed deferred variable annuities.

https://sales.eassistllc.com/sales/vanew.php

• Analyze the number of years a client’s assets will last after they start their retirement.

https://sales.eassistllc.com/sales/investment.php

Other calculators are being built and E*Assist is developing many of these for free. We welcome the opportunity to discuss your specific requirements.

Despite the recent market turmoil, the support & compliance demands facing modern broker dealers and investment firms will remain. Regulations are becoming more and more demanding. Some firms are moving from annual, to quarterly and even monthly attestation reports to remind everyone of their responsibilities and demonstrate that effective procedures exist when the auditors come knocking. FINRA is responding as well. Audits are now month long affairs of going through businesses with a fine toothed comb. They’re scrutinizing written policies and procedures expecting to see audit trails and effective implementation for each requirement.
The net effect on reps, advisors and the home office, is more work and more expense. Responses vary but often introduce explicit and less obvious costs and burdens on your firm. So what can be done? Below I’ve outlined five ideas for reducing your compliance and support expenses:

1. Reduce your FedEx & mailing expenses
Do you consider your FedEx bill as a cost of doing business that will never decline? And what about your reps? The cost of all those daily envelopes may be included in a volume discount, which is great, right? But look at all those hard dollars spent sending paper this way and that. And now that 2821(c) will soon require principal review of all variable annuity sales, this means even more paperwork to send and review. Eliminating your FedEx bill altogether may be a stretch, but imagine it dropping 10%, 20% or even more.
But how can this be achieved? Instead of reps sending you written applications, they can create “e-forms.” Customized to look exactly the same as the original, these electronic equivalents require no handwritten input, printing or mailing. They are completed online and are immediately available at the home office for execution or review, eliminating the need to mail or FedEx. The information is more accurate and complete with validation procedures that work in real-time to check the data as the rep enters it in the first place. The results are self evident: faster, more accurate and less expensive!

2. Reduce rekeying data
How many hand-written forms do your reps submit, which must still be manually keyed into a data entry system? New account applications, attestations, outside business activities, sales & check blotters. Emails may have replaced faxes (thank goodness) so at least you can read the request now, rather than those blurred images of old, but look at the time your support and compliance teams are taking rekeying data that could have been captured in electronic form from the outset by the originating rep. Perhaps without realizing it you’ve introduced unnecessary (manual) steps that ultimately require you to hire more support people to fulfill.
Once the rep captures the client’s details into the database, it’s a snap to create applications and orders that contain that investor’s details, without error. You’re actually moving the data entry responsibility from your support teams to the person who knows most about the client, your rep. Smart systems can help guide the rep if they omit critical information, or mis-key. Once captured and checked, it’s accurate for all subsequent activities.

3. Stop chasing reps - and stop the reps needing to chase you!
How many times in any given day or week are you and your support people chasing reps or advisors for a response? “Have you completed your attestation report?” “Have you declared all your outside business activities?” and so on and so forth. And what about the reps? They might have emailed you a note (more on that later) asking for approval for a marketing event – and then they call you repeatedly asking for your response.
Think of the time you’re all wasting with those phone calls and endless emails flying to and fro trying to track down the status of a request – to a question that has already been “automated” i.e. sent as an email!
So imagine a dashboard that both rep and home office can view at any time showing the status of any request. It can even break requests, such as attestations, down into individual questions and alert home office if one part was omitted or answered incorrectly. Imagine the time saving!

4. Increase your support to producer ratio
Have you been tracking your support to producer ratio? I’m sure you know how many administrative and compliance personnel your home office needs to support your far flung independent reps, but have you ever measured the number of assistants your reps themselves have had to hire? Add up all those heads and you will find your ratio is lower than you expect. Even though you’re not paying for reps’ assistants, it is reducing their profitability, which will put pressure on you to cut costs and raise payouts.
Using the following basic formula, you can conduct your own cost benefit analysis to determine the potential savings that can be gained through automation. This will feed straight into the number of support personnel needed to maintain business momentum:

% of admin. tasks that can be automated x # of support staff x average staff cost/year = staff reduction savings

So, a firm with 20 support staff paid an average of $36,000 annually that can potentially automate at least 20 percent of their administrative tasks could trim four heads and save $144,000.

A more detailed calculator is available that allows you to dial in the individual tasks applicable to your firm and measure the actual hard dollar saving opportunity. Please visit www.EAssistLLC.com/compliancecalculator

5. Stop all those emails!
Stop emailing! This would seem contradictory. Surely emailing is the easiest form of automation. Remember the days of letters and faxes, now everything is electronic. This has to be better, no? But is it really? If ever the expression “too much of a good thing” applied it would be to email. So what is the problem with email?
1. It’s still quite manual: You have to write the email, attach the supporting documents and send. When you receive an email, you have to download the attachment, edit, reattach and resend. There are still several steps involved and no inherent data validation, so you can send and receive items faster, but you spend more time chasing the missing information!
2. No real audit trail: Have you ever been chased by your IT department to reduce the size of your email inbox? Too many attachments taking up too much memory. So after deleting or archiving, where’s your audit trail? Try to reconstruct a thread that happened a few years ago and email’s limitations quickly become apparent, and this doesn’t impress the auditors.
3. No status & progress reports: You email a request and assume (fingers crossed) that it’ll be read and actioned. But you know better than that. Did the recipient action your request? How do you know? You could send another email or phone, but then you’ll hit voicemail. Wasted time means wasted resources.
4. No real security: Is your email smart enough to stop anyone sending sensitive documents and content to the wrong email address? If yes, you’re lucky. Most emails just blast out the message with all those sensitive attachments.
An email may remove the need to physically mail a letter, but it still requires you to perform a lot of functions and tasks that could otherwise be completely automated, removing the inherent limitations in any email system.

Eliminating these areas of cost and inefficiency might seem a pipe dream. But grab a pencil and estimate the hard dollar savings your firm and your reps could enjoy if it were true. It’s a big number that could be better used to drive efficiency through your firm, increasing profitability, saving expenses, reducing administrative tasks and helping to shorten audits by demonstrating effective implementation of polices. You will also be able to hire fewer, higher caliber people who can focus on driving your businesses growth.

E*Assist’s unique business operating platform is designed to automate the many business, administrative and compliance tasks that soak up your firm’s resources. We start with an analysis of the savings our solution can bring to your firm. Using sophisticated software models that analyze each stage of your business, we can demonstrate the actual savings your firm can enjoy. After the completion of the analysis, we will help you pilot E*Assist to confirm the year-over-year impact for your firm. Once you’re satisfied, we’ll even stick around to help develop and implement an internal training program to maximize firm-wide adoption and savings.