Navigating Regulatory Change Management as a Financial Advisor
An effective change management process is a must for every financial institution, including financial advisors and their firms. Depending on the type and extent of the event initiating the process, meeting compliance demands may require changes to the training and education process, operational adjustments, risk management, client communications, resource allocation, and more.
So how can a financial advisor or firm adapt the change management process to meet their needs while considering available resources? What steps should they take to meet regulatory requirements and improve their internal operations? Let’s discuss.
Breaking down the change management process
Regulatory change management is the process of identifying, evaluating, and implementing new or amended rules and regulations. Since the financial services industry is obligated to adapt to regulatory updates, the change management process is designed to be repeatable, enabling individuals and organizations to adapt their operations and practices as needed.
The change management process has six major steps. While every financial advisor and organization must customize their process to meet their clients’ needs, the overall framework is the same.
- Identify Changes
Financial advisors must first note the change, which can stem from within their organization, such as launching a new client service, or external factors, like new laws.
Navigating external changes is demanding, requiring time reading lawsuits, regulatory guidance, and insights from the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), and other regulatory bodies. If you haven’t already, consider using compliance software solutions to streamline this task. Delegating this task will enable compliance personnel to focus on the overall management process.
- Create an Impact Analysis
Once a change has been identified, it’s time to assess its impact. Ask yourself which products, services, and systems are affected by the change. Depending on the extent of the change and resources needed, you may need external vendor support.
Once the evaluation is complete, estimate the timeline and resources needed to address the change. This includes identifying dependencies on vendors and other internal departments to meet the timeline.
- Determine Responsible Parties
Change management is a team sport, and the type of change will determine the team members who need to be involved. For example, financial advisors may need to work with information technology (IT) colleagues to update a technology-powered service. Other departments that may need to be involved include compliance, human resources, and marketing. Once the team is assembled, clear responsibilities should be designated to avoid confusion and ensure the schedule remains intact.
Appointed team members should schedule regular meetings for all parties to provide updates and address any issues or unexpected setbacks. The buy-in of board members and senior team members can provide additional strategic oversight and guidance to meet the change requirements in the context of your firm’s larger goals and aspirations.
- Create an Action Plan
Change only happens with a detailed plan. After investigating the change thoroughly and assessing its effects on operational or customer-facing processes, team members can begin:
- Revising policies and procedures as needed
- Performing or updating risk assessments
- Creating a communication plan
- Designing staff training programs
- Conducting testing before the full rollout
Once the plan is in motion, check in regularly with your colleagues and update the leadership team as needed.
- Prioritize Regular Communication and Documentation
The importance of verbal and written communication during the change management process shouldn’t be underestimated, especially when it comes to high-stakes changes involving operational risk, financial risk, and other high-risk areas.
Encourage your team to communicate and report items such as the change summary, updates on action plan progress, identified challenges, proposed solution, and budget status. Maintaining detailed records—including information about decisions that were ultimately not implemented—is crucial for historical context and can be shared with auditors later.
- Conduct a Post-implementation Analysis
One of the most critical process steps is the post-implementation analysis, which is an assessment of the effectiveness of the change and lessons learned.
Gather your team together to share insights, including any loose ends that need to be addressed, whether the implementation met its objectives, comments on the final timeline and budget, and any areas for improvement. Taking the time to discuss these learnings is valuable for future change management processes and can provide takeaways for continuous learning and improvement.
How investment compliance software can help
Change management is inevitable, underscoring the need for financial advisors—and all financial industry participants—to adapt to regulatory changes, market dynamics, and technological advancements to the best of their abilities.
The good news is that your firm isn’t an island; some systems and solutions can help you adapt to future changes. Investment compliance software streamlines this process by automating compliance tasks, reducing errors, and providing real-time insights so you can focus on delivering exceptional services to clients. To learn more about how change management and compliance software can help your firm maintain its business resilience, visit ncontracts.com.
