How to Calculate the Cost of Compliance
Applying the fiduciary standard in accordance with the latest Department of Labor (DOL) regulations can be a steep expense for financial firms. Wealth management organizations are making significant investments to restructure their businesses and implement technology solutions to ensure their compliance. These transitions include up-front costs and hidden expenses that can come as a surprise as firms move swiftly to align with the fiduciary rule.
To weather the changes and shoulder the costs, preparation is key. Wealth management firms that look ahead and set appropriate expectations improve their ability to leverage resources and tools in ways that allow them to recover their compliance-related investments.
The Direct Costs of DOL Compliance
Even prior to the DOL rule going into effect this June, wealth management firms were preparing for significant shifts in their standards and procedures to accommodate the law. These changes and the additional administrative work they entail increase the cost of doing business.
Documentation and transparency mandates also necessitate significant technology investments. New systems, training, and process adjustments are crucial investments firms must make to align with four key areas of the new law:
Veiled Compliance Costs Add Up
There are behind-the-scenes compliance costs as well, and though they may seem inconsequential, they can add up to carry big impact. Many firms are significantly altering the ways they do business, changing the types of services they provide and creating new fee schedules to keep their offerings aligned with the DOL regulation. Major modifications can necessitate the help of expensive legal advisors. Firms must also assume the expense of communicating their changes in services and fees. They must update their marketing materials and web sites to keep investors informed.
Perhaps the most unforeseen and impactful costs are associated with non-compliance, however. Failure to abide by the DOL regulation can mean steep fines for wealth management firms. A damaged reputation is also a hefty price to pay when firms are unable to satisfy an audit. Lost business due to violations of the DOL rule can cost firms much more than investing in compliance.
A Shiny Silver Lining
Compliance costs become much more manageable when firms select the right tools to support them. Technology that is purposely built to simplify DOL compliance can reduce the overall expense of aligning to updated regulations in four key ways:
Technology Turns Compliance into Growth Opportunity
To give advisors full control over the management of their clients’ accounts in compliance with the fiduciary standard set forth in recent updates to DOL regulations, First Rate offers ARKON. This fully integrated wealth management solution blends a powerful CRM platform with advanced reporting, fee and account monitoring, and document management. It features e-signature capabilities for completing BICE agreements, and includes a client portal where investors can access up-to-date account information and review critical documentation. ARKON helps advisors ensure all DOL compliance requirements are met with each account, and it puts proof right at their fingertips to help ease firms through audits successfully, avoiding fines and negative legal repercussions.
Employing ARKON makes advisors and brokers more efficient, enabling them to focus on serving their clients’ needs and cultivating meaningful relationships. With more time, energy, and attention to commit to providing a higher standard of service to investors, firms can use their investment in ARKON to enhance profitability while ensuring their practices are aligned with the fiduciary standard.