[When applied using a strategic mindset, technology can solve many challenges, but you need to have a clear understanding of what technology can best accomplish. Unfortunately, we can be easily distracted and overwhelmed by our current business environment which is being propelled by accelerating rates of change. This makes it even more important to slow down and open your thinking as to how technology can be both a secret weapon and a strategic partner.
Technology’s greatest benefits include saving time and effort, organizing and developing efficient processes behind policies and procedures, streamlining workflows, automating the creation and maintenance of new processes in response to changes, and simplifying your business management response to complex challenges. As an example, technology can transform the function of regulatory compliance into a superpower—reclaiming your calendar by keeping track of all SEC deadlines, completing all regulatory filings on time, and making sure that your compliance program is exam ready.
To better understand how technology is being applied to address critical industry business issues like regulatory compliance, we had a discussion with Institute member Bo Howell of Joot—a fintech company that provides web-based compliance technology and services to registered investment advisers, broker-dealers, and funds. We particularly wanted to explore his perspective and the thinking behind designing tech solutions in our ever-changing regulatory compliance environment to make compliance work for advisors.]
Bill Hortz: As a technologist, can you share your perspective on how you see that technology can solve concerns and challenges in financial services?
Bo Howell: One of the major problems that many investment advisory firms experience is a gap between complex business requirements, like regulatory compliance, and actual operations. That gap is due to a few different factors, including a lack of efficient tools, insufficient time to manage compliance, and a lack of expertise. Technology can help bridge that gap by providing the tools needed to save time and increase efficiency. Many financial advisers frequently use manual processes to conduct reviews and keep records. Excel and Word files are emailed back and forth, version control is a mess, and efficiency suffers. Too many people either spend too much time on administrative tasks, and not enough time on growing their business, or they neglect their tasks and fall behind.
Some advisers make use of current technology tools to help streamline their process, but these tools were not necessarily designed to solve the problems people are using them to solve. For example, many of today’s customer relationship management tools are being used for operations and compliance. Sure, these tools can automate simple workflows, but do you really want to use a tool designed for sales to track billing and compliance? In other words, although these tools automate parts of the process, they do not solve all the problems people have, including big ones like time lost to routine tasks.
Hortz: How do you recommend that advisers better understand what technology can do to solve problems like staying on top of ongoing changes in regulatory compliance? How can tech be their secret weapon?
Howell: Most systems are designed to focus on narrow problems. For example, commonly used systems focus on trade order management, sales, customer relations, personal trade reporting, etc. Unfortunately, many firms are struggling to manage all these separate systems and databases. Technology can make a difference only when it promotes both innovation and integration.
Technology can take the compliance burden off advisers in ways that allow them to focus on growing their business and serving their clients—the things they really care about. But before advisers can use technology to their advantage, they need to know what specific problems or processes take their time and energy away from their business. Doing an inventory of the most time-consuming tasks and the type of risks a firm faces is an essential first step. This way, criteria are established for evaluating existing tools and determining how specifically they can help ease the burden. Once they identify these areas, then advisers can focus on the tech solution.
Hortz: How did you design your technology so it was easy to use and adaptable to each client firm?
Howell: We try to take a holistic approach with our technology. Instead of saying we want to do one thing in compliance well, we focus on automating 80% of all compliance tasks. That’s our vision. Too many RegTech firms are focusing on just a few areas of compliance, usually those that are easiest to solve. At Joot, we are designing features for both easy and hard tasks. For example, most RegTech systems can collect certifications or personal trading data. We do too, but we are also designing tools to help with risk assessments, annual compliance review, advertising and marketing review, and more. We are pushing RegTech into machine learning and AI because we are not satisfied with just process automation.
For example, we recently launched our new Policies Manager. There are systems out there that create generic policies and procedures. Users can take these templates and add them to their manual. But many of these systems simply present users with a laundry list of policies and procedures that cannot be edited. We took a different approach. As compliance professionals, we can read a Form ADV Part 1 and identify many of the policies and procedures for that specific business. We used data mapping and other tech tools to create a customized set of policies and procedures specific to each advisory business. Users can download these policies or maintain and edit them directly in our system via our newest feature—JootDocs.