More On Legal & Compliancefrom The Advisor's Professional Library
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
Despite wearing multiple hats and dealing with an onslaught of new regulations, compliance officers’ paychecks are dwindling and their budgets are being slashed.
A just-released survey by National Regulatory Services, Moving in the Wrong Direction: Compliance Spending and Compensation in an Era of Enhanced Regulation, which polled 432 compliance professionals working for investment advisory and other financial services firms, found that compliance pros are getting paid less while being tasked with increasing amounts of non-compliance-related work.
The survey results are “quite alarming,” John Gebauer, managing director of NRS, told ThinkAdvisor in an email message. “The compliance officer is charged with very important tasks, such as spotting risk and pursuing the policies and procedures that bring such exposures to acceptable levels as deemed by agency regulations and local and federal laws.”
When asked about their daily duties, 48% of the respondents said they spent less than 50% of their time on actual compliance issues.
The fact that compliance officers are “being tasked with non-compliance roles and considering the lack of compensation growth in the space during this time of increasing regulation, the industry seems to be moving in the wrong direction,” Gebauer says.
The majority of those polled — who have been working in the compliance field for an average of 11 years, and have been in their current role for an average of seven years — were full-time employees, with 55% serving as chief compliance officers, a decrease from the 66% polled in 2011 who classified themselves as CCOs. Sixty-eight percent of the respondents work for investment advisory firms.
The average current compliance officer’s salary is $119,710, down slightly from the average pay of $119,783 reported in 2011, the survey found.
But compliance officers working in small firms — usually the ones juggling the most duties — earned significantly less per year ($91,674) than those employed in medium-size firms ($133,439) or larger firms ($127,745).
Regionally, compliance officers in New York earn the most at $177,895, while those in Michigan earn the least at $83,684.
Compliance officers’ budgets are being chopped as well. The average overall compliance budget dropped in 2012, down to $133,226 in 2012 from $139,931 in 2011.
But how compliance officers are allocating those resources remained much the same in 2012 as the previous year, the survey found, with technology and software outlays totaling around 35%, education and training about 25%, consulting about 25% and outsourcing making up the difference at approximately 15%.
The survey also found that compliance officers are seeing a “significant drop” in incentive program participation, with involvement in monetary bonus, profit sharing and stock option programs dropping from 60% in 2011 to 51% in 2012.
Check out SEC Sanctions Portfolio Manager for Lying to Chief Compliance Officer on ThinkAdvisor.