Building a Culture of Compliance
Main Contributor: Elizabeth Cope, CPA, CSCP, CIPM, CEO & Lead Consultant
You Are Only As Strong As Your Weakest Link
Compliance is not just the job of the Chief Compliance Officer (“CCO”), but of the entire organization. The nefarious activities of one employee could bring a firm down. A culture of compliance is a leadership skill that brings forth accountability, influence, and collective strength. As the CCO, it is your job to instill that understanding within the firm. It might not come naturally, but it is a necessary skill set that can be developed if you don’t already have it. Within this article I am going to provide some of the key skills I personally have identified within firms that have a strong culture of compliance. That is not to say there may be other skill sets or even more complicated issues, such as an unsupportive leadership team, but even then, I believe these skills can be applied to almost any situation.
Educate
People will be more likely to follow the rules if they understand the “why” behind them. As the CCO, you need to be an educator, providing background, history, and the reasons why specific policies are in place. It’s also important for your staff to understand the real word consequences of not following those rules. I truly believe in providing these lessons consistently throughout the year as incidents occur and not just waiting for annual compliance training. Learning from a situation in the moment can have a more powerful impact on one’s understanding because it’s connected to the action.
Re-Frame Compliance
Your employees may not see compliance as an important function because it’s not a “money-maker” and it’s often considered the “No Police,” preventing them from growing and expanding the firm. Re-frame that narrative. Instead of just saying “No”, hear what they want to do. Then, educate them on the compliance requirements associated with that choice so the right decisions are being made collectively. Further, regularly demonstrate how an effective compliance program reduces risks of enforcement and litigation, protects the reputation of the firm, and builds trust with your clients, which in turn, attracts better clients and talent.
Lead By Example
Buy-in for compliance will not be effective unless leadership is leading by example. Encourage your executive team to reinforce the firm’s policies in their everyday decisions. Ask leadership to visibly support and participate in compliance initiatives. Use team meetings for leadership to share updates on compliance goals.
Make Training Relatable
I have already discussed the importance of real-time learning, but you can make all training relatable by providing specific examples or case studies that your staff will understand, which will make the training more effective. People are more likely to remember information when they can connect it with an experience or something they already know.
Listen
Invite staff to provide input when building your compliance program to foster shared ownership in the firm’s policies and procedures. Gain feedback and make changes so the procedures are practical and reasonably designed. Gaining input from staff can also help redefine a process that is cumbersome and could be completed in a more effective way while still allowing the firm to remain compliant, which will further ensure the staff follow suit. It can also help the firm surface issues early, reducing compliance blind spots.
Celebrate Compliance Wins
Share stories of staff members who did the right thing. Recognizing teams or individuals who contribute to the success of the firm supports a strong culture. Tie those wins to the firm’s values.
Remove Fear
Some leaders like to lead with fear. I personally disagree with that tactic. Firms who remove fear and build trust with their staff are more likely to report issues and ask questions which allows the firm to continuously address issues early and reduce blind spots.
Integrate Compliance
Compliance should be an integral part of everyday operations. Use checklists, tech prompts, and/or workflows to reinforce the procedures. For example, when you have a new hire, provide HR with a checklist of compliance requirements, such as initial holdings reporting. For a new client, provide your client service team with a new client checklist that incorporates compliance requirements for clients such as the delivery of the ADV.
Hold Everyone Accountable
Hold everyone accountable for compliance; not just the CCO. You could consider adherence as an aspect of their bonus, raise, and/or promotion. Further, setting clear roles and responsibilities that incorporate the compliance components can set clear expectations among the staff.
Conclusion
Being a CCO is not just about filing the ADV or completing your annual review. It’s also about building a compliance program that the entire firm believes in and supports. Sometimes, you may join a firm where leadership has already laid this foundation. Other times, you may need to build it from the ground up. Either way, your role is to lead that charge. The practical tips in this article are tools you can use to help you move in that direction. And if you need help developing those leadership skills, working with a coach can be a valuable step.