Fintech Corner (6/9/21)

How Practifi Answered The Financial Services Compliance Quandary


Financial firms now have a new option to operate in a manner that is compliant by design.

Practifi, a business management platform for financial advisory firms, has launched a new compliance application to create a unique, custom-built compliance dashboard within a business’s operations.

Compliance has long been looked at as a burden, said Adrian Johnstone, chief commercial officer at Practifi, but it doesn’t have to be, especially if technology and automation create a firm that by default operates in a fully compliant manner.

“Compliance is looked at as a necessary evil within most firms, financial services businesses are just hoping that their compliance burden isn’t going to become a distraction from going about their day-to-day business,” said Johnstone. “That leaves technology providers to figure out how they can offer firms the best possible compliant experience.”

But financial firms also need flexible technology to accommodate changing financial regulations, said Tom Westhoff, vice president of global sales at Practifi. Advisors want to be able to leverage technology to make sure that the right things happen along the client journey.

The solution can be found in automation, Westhoff said.

“In small firms or large firms, advisors should be looking towards automation and supervision as a partner,” said Westhoff. “The growth in data and in AI, and the data obligations that regulation has placed on the financial services industry, has created a great opportunity.”

Automation helps firms operate quickly, efficiently and effectively in a manner that doesn’t create issues for the end client or the firm, said Westhoff. In small firms, automation can help ensure that procedures like client onboarding and account opening occur in a timely but compliant manner.

In larger firms, automation can help manage multiple branches and the home office’s obligation to conduct annual inspections.

But even more profoundly, automation can be put to work in the trove of data collected by financial firms, creating significant advantages from regulators’ requirements that firms know their clients and track and archive communications. Westhoff calls this the “data opportunity.”

“It’s tough to put automation and processes surrounding compliance in place if you don’t have the appropriate technology,” said Westhoff. “Advisors need to embrace modern technology, like the type we’re providing at Practifi, and then partner with broader organizations to make sure they are both protecting the data that they receive from clients and that they are using the data to create opportunities to engage with current and prospective clients.”

Practifi’s new compliance app answers the calls to help firms better leverage data, in part by centralizing information for compliance personnel.

The company has always served compliance users like a firm’s compliance officer, but until recently, hadn’t offered compliance personnel their own separate application.

“Because we’re compliant-by-design, the compliance manager no longer has to search to try to find where there may be risks. The system now automatically serves up that information to them,” said Johnstone.

Compliant by design means that everyone in the operations and revenue-generating side of a firm can conduct their business without having to spend additional time and resources worrying about compliance, said Johnstone.

The app includes some simple functionality to ease a firm’s compliance burden, like creating alerts to identify client records that lack up-to-date data and the ability to pre-aggregate the reporting needed for a firm’s Forms ADV. Thus, by design, Practifi helps a firm ensure that it collects, maintains and updates the minimum set of know-your-client data required by regulators in real-time.

“We’re really looking at how to automate the data work that currently takes compliance teams many hours a month to extract, analyze and interpret, so they can place more of their focus on how to act accordingly rather than finding and analyzing data,” said Johnstone.

Practifi also enables firms to build seamless workflows between compliance teams and other departments of a firm, said Johnstone.

For example, firms that need their marketing campaigns approved by compliance can create an approval step that automatically sends the campaign to compliance at a certain point in the process. Financial planning steps that require review and approval can also be automated.

“The real power is that we’re giving our clients control, framework, education and support so they can serve their own compliance needs easily,” said Johnstone. “We don’t want them to have to be dependent on us to choose what they can set up themselves and what they can or can’t do. If a regulator, like FINRA, comes out with a new control or requirement, firms can instantly configure that themselves and they don’t have to wait for us to respond.”

To create the app, Practifi talked to a group of compliance managers to find out what would create the most efficiencies for their firms, said Johnstone. They found that firms were still struggling most with human risks—risks from duplicative, manual processes. Thus, the focus on automation.

“Automation also informs advisors of key dates coming up in their client profiles that might require firms or advisors to do something to ensure something is happening and connections are made,” said Westhoff. In Pracitfi’s case, because of its ability to manage third-party vendors, relationships with centers of influence and virtually any other relationship a business can engage in, automation has the power to completely transform a firm.

Automation can also catalyze transformation already in progress as advisory practices grow and evolve into enterprises. As firms warily eye the administration of President Joe Biden and the recently seated Democratic-controlled Congress, they can rely on software that both creates guardrails to ensure that every process is engaged in compliantly, and enables flexibility to adjust to a changing regulatory picture, said Westhoff.

But with Practifi, many firms will for the first time be able to give compliance teams easy access to the same data that advisors use but across a dashboard tailored to their own needs.

“It’s surprising to know that chief compliance officers in many firms are reduced to working in isolated systems in some places, or even on spreadsheets in others,” said Johnstone. “No one figured out that you could put the compliance system within the same experience as the advisors.”