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Choosing a Confident Compliance Department?

I often spend the first part of Monday mornings catching up on the pile of industry and business reading that I took home over the weekend, but did not get all the way through. This morning what jumped out at me was two pieces, one written by Jodie Papike in the May 20 issue of InvestmentNews and one a blog post from Dharmesh Shah, founder and CTO of HubSpot.

Jodie Papike’s piece is titled “Choose a compliance department carefully” and the tag line is: “Transitioning advisers should ask questions to determine how ‘user friendly’ the culture is.” Her lead is that “about one-third of the financial advisers who exit their broker-dealers, either of their own accord or as a result of being terminated, leave because of a conflict or miscommunication with their compliance department.” Ms. Papike points out that, “Typically, when advisers explore a new firm, their focus is on finding the right technology platform and level of marketing support, when it is just as important to find a compatible compliance department.”

As a compliance services company, we give a lot of thought to what makes an effective and strong compliance department and also to what makes our clients think of us as a partner rather than an obstacle. One of those ways is identified in the list of questions Ms. Papike puts out. We work hard to find creative ways to say yes. When compliance is inclined to say no automatically or need convincing to think about a way to say yes, clients, internal or external, start to find creative ways to avoid us. Unless we are willing to challenge our first reactions and see if we can come up with an alternative approach, we aren’t really fostering an environment of compliance. Our experience is that it is our willingness to think creatively and yet hold the line when we need to that makes our clients seek out our advice. We protect the firm, but not at the cost of the business. Only if we approach a compliance issue with a sense that there is a way to work out an acceptable – perhaps even a good or great – solution will our clients come to us with the issue to begin with.

And that leads to the second piece “9 Qualities of Truly Confident People.” Each and every one of these qualities helps make a good compliance consultant. Mr. Shah identifies these nine as:

“1. They take a stand not because they think they are always right…but because they are not afraid to be wrong.” In compliance, we take a stand when we think we need to, but we need to be prepared to change our mind if it turns out we are wrong. Finding a solution to a compliance issue is more important than being right.

“2. They listen ten times more than they speak.” 10 times? Not sure, but we certainly can’t come to understand the issue unless we listen. If we don’t listen we can’t determine where the business need lies to figure out if we can re-frame the discussion in a way that meets the business need but addresses the compliance concern.

“3. They duck the spotlight so it shines on others.” Compliance is not a field for those seeking the spotlight. Enough said.

“4. They freely ask for help.” Ok, in my personal life I may not be too good at this, but here at work, so many great ideas and approaches to new problems come from asking for help that it has to be a no-brainer. Compliance departments are filled with bright and competent people – asking for help is a great way to solve a problem.

“5. They think, “Why not me?” In its best form, compliance is a problem solving field. So why not be the one to figure out a solution that has left others wondering what to do. We can “quietly, without calling attention to [our]selves, [we] go out and do it. This is, I think, not so dissimilar to number 3. We in compliance are often quite content to let the spotlight shine on others while we do the behind the scenes problem solving.

“6. They don’t put down other people.” One of the things that is most important for compliance departments is to assume that our clients have good intentions. If we assume otherwise, that comes through in our interactions and we appear to put down other people. However, if we assume good intentions – until proven wrong – we are much less likely to put anyone down.

“7. They aren’t afraid to look silly.” This may be one that is particularly hard for us who are in compliance. We tend to be pretty serious people, at least in our professional selves. However, this wiliness to look silly is related to the willingness to be wrong. If we aren’t willing to look silly – to not be in top form or to misstate something, or to get twisted up in our explanation of a mandate – we won’t really be meeting our clients in an honest way because none of us are always at our best – even those of us in compliance! {shudder}

“8. …And they own their mistakes.” Again: similar to being wrong. Part of the process is to be willing to be wrong and then the next part is to own it. If compliance can’t own our mistakes and say how we would do it differently next time, why would there be a next time?

“9. They only seek approval from the people who really matter.” In compliance who “really matters?” To me it is those people, whether compliance personnel, clients, or regulators who are interested in a real and honest culture of compliance. We may disagree on this issue or that one with regard to a specific resolution or interpretation, but, where we find common ground is in the understanding that a culture of compliance is what matters and that such a culture is not dependent on one determination but a process and a respect for the process. Numbers 1-8 are how that process and the respect is developed. Confident compliance personnel can develop a process that is worthy of respect because it doesn’t lead to an automatic “no.”

Confident compliance personnel will more naturally create the “user friendly” compliance department that Ms. Papike recommends looking for.