17 Compliance Tips Every Independent Financial Advisor Should Know

11 min read
June 27, 2019

Here at XY Planning Network, our compliance team has the privilege of working with hundreds of advisers to help them develop and grow their firms’ compliance programs. This unique perspective has given our team insight into common challenges and pitfalls that many advisers face.

We’re going to let you in on our secrets and share our words of wisdom for Chief Compliance Officers from the very beginning of the registration process and beyond. In their own words, here are the top tips from XYPN’s compliance team.

Where Do I Start?

TravisJohnson“Lay the groundwork: Preparation is key to successfully moving through the registration process with as few delays or issues as possible. Lay the groundwork for each area of your business before starting the process of registering your firm. What are the services going to be? How often will you meet with clients and what will you cover in each of those meetings? Will you follow a service calendar? What will your fees be for those services? Who will your custodian be for managed assets and you will you have discretionary trading authority over those assets? These areas will surely evolve as your firm gets launched and starts to grow, but knowing what your firm will look like on Day One of being approved will significantly help in preparing your documents and communicating with regulators throughout the process of registering your firm.” –Travis Johnson, Director of Compliance

KendraRehmDehn“For advisers using our registration service, please know we want your registrations to move through the system just as quickly as you do. Consistent, open communication with our team is very helpful. Your initial commitment to timely completion of requests from your compliance team member will help us help you keep your registration moving as quickly as possible.” –Kendra Rehm-Dehn, Compliance Specialist

XYPN Ashley Hunter Headshot“Plan for delays and use the wait wisely: When it comes to the initial registration process, the worst part is often the waiting period while the firm’s application is being reviewed. While many advisers can have their registrations approved within 8 weeks of the date of submission, there are often unforeseen and unpreventable delays that can extend the registration process. Registration volume can vary state-to-state and also throughout the year. Holidays and peak vacation months can affect regulatory staffing and response times. Some states have a very high registration-to-examiner ratio year-round, and in those states, registration timelines regularly exceed 6 months for firm approval.  

For many advisers, the waiting period can be a frustrating time with limited income that adds to the stress and unpredictability. One of the best tips I can give would be to plan for delays. If you know your finances will be stretched by a few months without income, you may want to consider a side hustle or part-time employment. Your side hustle may need to be disclosed on your ADV and Form U4 filings, but for most outside business activities that do not create a conflict of interest with the firm, having a side hustle is perfectly acceptable. 

Additionally, there are several activities you can work on during your downtime that can substantially benefit your firm in the long run. You may not have needed to provide a copy of your Compliance Manual, Privacy Policy, Business Continuity Plan, or Code of Ethics during the registration process, but you will need to have them prepared once your firm is registered. If you haven’t already started creating these documents for your firm, this is the perfect opportunity!

Also, we strongly recommend advisers keep their firm websites unpublished until their registrations are approved, but that doesn’t mean that you can’t get your website ready to go. Working on the creation of a website and other marketing materials will get you that much closer to signing your first client!” –Ashley Hunter, Compliance Specialist 

You don't want to be your own CCO, and we don't blame you. Check out how much  simpler Registering your RIA with XYPN can be

Where Can I Find Answers?

XYPN Shelby Brown Headshot“Don't Be Afraid to Ask Questions! No one person (or firm) has ALL the answers when it comes to IA Compliance. Use your resources to the fullest: your state regulators, (and for XYPN members) fellow XYPN members, XYPN discussion forums, and XYPN team members; and ask for clarification whenever you aren't sure if you're in compliance with a certain rule/regulation/requirement. There is no such thing as a stupid question!” –Shelby Brown, Compliance Consultant

KendraRehmDehn“I would highly recommend XYPN members get into a habit of attending both the initial registration and existing firm office hours.  Once the firm’s registration is approved, continue to attend the weekly existing firm office hours plus the monthly compliance webinar.  SO MUCH valuable information is covered here!” –Kendra Rehm-Dehn, Compliance Specialist

Scott Gill“Look for the questions to find the answers. ‘You don’t know what you don’t know’ until you ask. You won’t know what to ask until you dive in.” –Scott Gill, Senior Compliance Consultant

TravisJohnson“Communicate with your Regulator: We get it, who wants to call the people that can ultimately determine whether or not your business gets to…remain in business. When it comes to remaining in compliance with your state’s rules and regulations, no one understands the requirements and where the lines get drawn on certain business activities and fee structures better than your state’s securities examiners. You want to have an open line of communication with your regulators and build rapport with them so that both parties have a better idea of what to expect when your firm is audited. If there is something you would like to do or if you are uncertain about whether you should or shouldn’t be doing something, have the conversation with your state regulators. They are looking to you as the expert on your firm and its operations and will want to know that you are willing to reach out with concerns or for clarity as needed to ensure you remain compliant.” –Travis Johnson, Director of Compliance

XYPN Ashley Hunter Headshot“Finding answers as a state-registered RIA can be confusing! With individual states regulating firms registered at the state level, there are a lot of variations between regulations and expectations. Most importantly, DON’T PANIC! First, quite a bit of high-level state-specific information (minimum net worth, de minimus, additional required documents for registration, etc.) can be found on the NASAA website. If you can’t find what you are looking for there, each state has its own securities website where you will often be able to find registration instructions; links to state laws, rules, and regulations; FAQs; state publications; and notices to advisers. If the internet doesn’t have the answer, don’t forget about your state regulator team! Sometimes the best solution is to go straight to the source, and contact information for most states is publicly available.

There are also many resources available that, while not necessarily state-specific, are extremely valuable, including industry publications, podcasts, blogs, and newsletters. And don’t forget about other advisers! Who better to help guide you through the labyrinthine journey of running a compliance program than someone else who has walked the same path before you?

XYPN members have the added benefits of a growing compliance team and an established network of advisers who are dedicated to sharing their knowledge and helping you succeed.” –Ashley Hunter, Compliance Specialist

Help! I’m a CCO! Now What?

Scott Gill“Don’t try to figure it all out at once: RIA compliance is a professional field of study just like all others. It takes time to see the connection between all of the concepts. Expect at least a one year timeframe before you feel confident in being able to connect the dots.” –Scott Gill, Senior Compliance Consultant

TravisJohnson“Own your Role as Chief Compliance Officer: Creating and Managing your compliance program is an integral part of starting, running, and growing your firm. The sooner you take charge of your role as CCO of your firm, the less likely you are to get bogged down and become overwhelmed in getting caught up on your compliance tasks. Whether you were just registered or have been in business for years, it is never too late to start. As part of membership with XYPN, members get access to Smart RIA, an independent compliance task management solution designed to help you take charge of your role as CCO by making it easier to manage and document your ongoing compliance tasks. Set aside some time every month, as often as you reasonably can commit to on a consistent basis, to review your compliance tasks and ensure your compliance program continues to grow with your firm.” –Travis Johnson, Director of Compliance


“Embrace your role as CCO of your firm! Compliance can be scary and intimidating, but by not being afraid and embracing your role, you’ll only be setting yourself up for success.” –Kelsey Rich, Compliance Specialist

XYPN Shelby Brown Headshot
“Create a Risk Matrix and Follow a Compliance Calendar - The most important task in creating an effective compliance program is to find out what you don't know and then make a plan of attack that makes sense for your firm.” –Shelby Brown, Compliance Consultant

XYPN Ashley Hunter Headshot“Dedicate time to professional development. It’s challenging to feel confident in a new role when it feels like what you don’t know far exceeds that which you do. Even advisers with many years in the industry can be overwhelmed when they take over running a compliance program for the first time. Fortunately, there are several options for gaining knowledge and self-assurance in compliance.

First, consider compliance training. Training is available in many forms, from online classes to compliance conferences with in-person coaching and training. There are even certification options for dedicated compliance professionals to pursue. XYPN members have training included in their membership with access to our Academy training platform containing hours of videos on compliance topics (as well as non-compliance adviser training), including: CCO training, FINRA website administration, critical terms and industry practices, understanding your compliance documents, and many more webinars and resources!

It may seem counterintuitive to spend your time and money on training rather than prospecting for clients or improving your firm’s processes, but the value of training can not be overstated: feeling confident in your role as CCO will remove much of the fear and discomfort of managing a compliance program and will make recurring compliance-related tasks less daunting and prone to procrastination. Having a firm foundation will also allow you to communicate much more effectively with your state’s regulator team and make the audit process substantially smoother.” –Ashley Hunter, Compliance Specialist

What’s Next?

Kingston Hollman“Books and records: Keep them current. As a best practice, set aside enough time each week to review books and records, and at least annually review all social media to ensure that the information is current.” –Kingston Hollman, Compliance Consultant 

XYPN Shelby Brown Headshot“Organize your Books and Records: When your filing system is organized, your business will run more efficiently. The less time you spend looking for and pulling files to deliver to clients (or regulators!), the better. We all organize differently, and that's okay! Pick a system that works for you and allows for more efficiency in your day-to-day work life.” –Shelby Brown, Compliance Consultant

Scott Gill“Designate a specific time each month to devote to compliance, and stick to it! This can be reviewing documents, joining office hours, reviewing webinars and blogs, and completing tasks in Smart RIA (or compliance task management software).” –Scott Gill, Senior Compliance Consultant 

XYPN Ashley Hunter Headshot“Learn the rules. For state-registered firms, getting to know your state’s regulations early in the process and having a plan to stay compliant are the keys to success.

For example, do you know if your state requires GAAP (Generally Accepted Accounting Principles) for your financial documents? If so, accrual basis accounting will be required. Being aware of the requirements and getting your books in order from the start will definitely be much easier than having to transition everything later on!

Also, if you are required to meet a specific minimum net worth requirement for your state, it will be very beneficial to have a plan in place to ensure that your firm does not fall below the minimum. If your firm’s assets won’t allow for much of a buffer early on, many states will allow you to obtain a surety bond to meet the minimum. If you plan to rely on cash in a bank account that is also used for the firm’s expenses, you will need to ensure that you are monitoring your account regularly. The consequences of inaction in this area can be steep, and it is the responsibility of the CCO to report any lapse in minimum net worth compliance to the state.” –Ashley Hunter, Compliance Specialist

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Ashley Hunter

About the Author

As a Compliance Specialist for XY Planning Network, Ashley Hunter walks advisors through the registration process. Her keen attention to detail helps advisors understand the many rules and regulations of the process, and lets them cut through the clutter to determine what information is and is not relevant along the way. She is a self-professed “geek” with a love of all things related to regulations and documentation.

Outside of work, Ashley is frequently spotted petting strangers’ dogs, paddleboarding, backcountry skiing, reading science fiction novels, and photographing pretty much everything around beautiful Bozeman, Montana.

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