Unfortunately, despite my protestations to the contrary, regulators never seem to understand that increased regulations do not prevent criminal or unscrupulous activity. Rather, they just add to the compliance burden of already-overwhelmed small businesses.
With this as a premise, advisors need to appreciate that compliance efforts should be focused on successfully completing a regulatory examination. Compliance is not a series of folders or files—don’t drink that Kool-Aid! If you do, it will only provide a temporary—and false—sense of security. When the exam comes, you will be woefully underprepared. Rather, successful compliance is dependent upon just a few key factors:
Knowing what is on the exam. The majority of my travels involve sitting down with advisory firms to review the exam and discuss how to demonstrate compliance with the issues set forth thereon. Once that is completed, the advisor is prepared (or knows what he must do to prepare) to successfully complete an exam without any unnecessary panic or fear of the unknown. Unfortunately, the majority of firms continue to engage in compliance exercises that are neither required nor applicable to their business operations.