Hortz: What have you seen as the top areas that regulators immediately go to in their exams and what specifically can technology do to prepare and support advisory firms in those areas?
Howell: It is critical for advisory firms to align their policies and procedures manual with their business. That is a key target area for regulators in their exams. A generic or outdated manual that is not consistent with Form ADV Parts 1 and 2 is a huge liability for any firm. At the same time, manual processes to compile firm-specific policies and procedures take a long time, and the creator must have a deep understanding of SEC rules and industry best practices. Small firms with limited resources especially struggle to create and maintain adequate policies and procedures.
Tech applications can be designed, like our policies manager, to read a firm’s Form ADV and create a relevant policies and procedures manual in a matter of minutes. Instead of compiling a manual from scratch, advisory firms can let technology walk them through the process and do the hard work for them of making sure their manual is comprehensive, current, and complete. Our system also calendars important tasks and automatically sets up workflows related to those tasks, all with excellent documentation. They get time back in their schedule, and they are prepared for SEC exams. Our goal is to help firms automate some of the most important but often ignored or postponed compliance tasks that take so much time away from the business.
We are also working on integrating some of the key compliance tasks into our system, such as the annual risk assessment and written review. Imagine a system that reduces the time it takes to complete a risk assessment and annual review to hours instead of days.
Hortz: What other compliance areas or functions can technology offer a key solution for?
Howell: Machine learning models and artificial intelligence are the next areas of development for compliance technology. AI can both anticipate and help meet the needs of firms and their clients. For example, AI can analyze and compare a firm’s marketing materials against the new SEC marketing rule and flag content that is out of compliance. AI can also recognize prohibited language and add needed disclosures.
More broadly, AI can facilitate regulatory compliance tasks in ways that help advisers reclaim their schedules. Advisers still need to review, correct, and support any content auto generated by technology or flagged by AI, but these tools allow them to focus on other tasks and client relationships that matter the most.
We are starting to scope and design features that leverage AI to take our applications to the next level—automating 80% of compliance tasks.
Hortz: How can tech become a strategic partner?
Howell: To meet people’s needs, technology must be developed in line with how it is used. Technology can only be a partner insofar as it solves specific, pressing problems for the people who use it. We work closely with our clients to understand what tasks they need technology to perform for them. We also help our clients take ownership of technology by showing them how to use it to ease the compliance burden.
We even work with clients to identify when they need people instead of systems. For example, sometimes firms do not need another layer of technology; rather, they need someone internally to become a superuser of existing systems who can identify where more integration is needed. We can then work with that person to develop such integration.
Hortz: What kind of services do you offer to complement your technology?
Howell: Joot offers a range of compliance services to complement our technology. For example, we can manage an individual compliance project or an entire compliance program. We can provide various levels of ongoing compliance support or oversee a firm’s technology vendors. At the most basic level, we help our clients during peak periods (e.g., quarter end, Form ADV renewal, etc.). But we can also serve as the compliance department for an in-house CCO or as the outsourced CCO. The level of service needed depends on the business structure, internal resources, and the adviser’s growth strategy. Our services and technology work hand in hand to get compliance done for firms with a range of needs.
Hortz: Any other thoughts or recommendations you can share with advisory firms on how they can use technology to manage and be on top of changing compliance challenges? Any advice particularly on mindset to guide yourself in working with technology?
Howell: Technology can help advisers hand off tasks they do not have the time—or desire—to do. But adopting technology does not mean turning compliance completely over to automation. Nothing—not even the newest, shiniest app—can replace compliance expertise. I always remind people that technology is a tool, but someone must still wield it. In compliance, technology has not yet evolved to the point of being fully autonomous. It works best when it is developed to address specific needs. People are still a big part of that equation.
We work closely with our clients to understand what technology can and cannot do, and what it might do to solve future problems we are just starting to anticipate. To use another analogy, compliance can be viewed as fitness training. Technology is the equipment you need to make your body stronger and fitter. Services are your personal trainer who helps you maximize the benefit of that equipment.
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