90% Faster Response: Streamlined Regulatory Inquiries

90% Faster Response: Streamlined Regulatory Inquiries

Executive Summary

Santos Financial, a growing RIA managing over $750 million in client assets, faced significant challenges in responding to regulatory inquiries. Their manual, decentralized process resulted in slow response times and increased compliance risks. By implementing a standardized workflow management system and automating key tasks, Santos Financial reduced their regulatory inquiry response time by 90%, significantly improving efficiency and demonstrating a proactive approach to compliance.

The Challenge

Santos Financial experienced rapid growth over the past three years, expanding its client base and assets under management by 45%. However, this growth exposed vulnerabilities in their compliance infrastructure, particularly in responding to regulatory inquiries from agencies like the SEC and FINRA.

Prior to implementing a streamlined system, responding to a single regulatory inquiry was a cumbersome and time-consuming process. Here's a breakdown:

• Document Retrieval: The first step involved locating relevant client records, transaction histories, and compliance reports. This process was largely manual, relying on searching through paper files, digital folders scattered across multiple servers, and various software systems. On average, document retrieval consumed 20 hours per inquiry.
• Information Consolidation: Once documents were located, they needed to be consolidated into a coherent package for review. This often involved manually compiling information from different sources, creating spreadsheets, and writing summaries. Consolidation took approximately 15 hours.
• Legal Review: The consolidated package was then sent to Santos Financial's external legal counsel for review. Due to the volume of information and the lack of a standardized format, legal review often took 30 hours or more, adding significant delays and costs. Their legal fees alone were averaging $15,000 per inquiry.
• Response Preparation: After legal review, the compliance team would draft a response, incorporating the feedback received. This process required careful attention to detail and ensuring accuracy, taking another 10 hours.
• Internal Approval: Finally, the draft response needed to be approved by the Chief Compliance Officer (CCO) and other senior management. This process could take several days, particularly if the CCO was traveling or busy with other priorities.

In total, responding to a single regulatory inquiry took an average of 75 hours, costing the firm valuable time and resources. More importantly, delayed responses increased the risk of regulatory scrutiny and potential penalties. The increasing complexity and volume of regulatory requirements meant that Santos Financial was spending an estimated $75,000 annually just on responding to inquiries. This was unsustainable and hindering their ability to focus on core business activities. The stress on their compliance team was palpable, with frequent overtime and a growing sense of being overwhelmed. The decentralized system lacked version control, audit trails, and standardized reporting, creating a perfect storm for potential compliance failures.

The Approach

Santos Financial partnered with Golden Door Asset to address these challenges and develop a more efficient and effective regulatory inquiry response process. The approach involved a multi-faceted strategy:

1. Workflow Standardization: The first step was to map out the existing regulatory inquiry response process, identifying bottlenecks and areas for improvement. Golden Door Asset worked with Santos Financial's compliance team to develop a standardized workflow that defined clear roles and responsibilities for each task.
2. Centralized Document Storage: Recognizing the need for a single source of truth, Santos Financial implemented a secure, centralized document storage system. This system housed all relevant client records, transaction histories, compliance reports, and other documentation in a consistent and easily accessible format.
3. Automated Task Assignments: To streamline task management and improve accountability, Santos Financial adopted a workflow management system (Asana). This system enabled the automated assignment of tasks, setting of deadlines, and tracking of progress, ensuring that no step in the response process was overlooked.
4. Standardized Templates: To reduce the time required to prepare responses, Golden Door Asset helped Santos Financial develop standardized templates for regulatory responses and document requests. These templates included pre-written language, fill-in-the-blank sections, and checklists to ensure completeness and accuracy.
5. Legal Counsel Integration: The process also incorporated seamless integration with Santos Financial's external legal counsel. The legal team was granted secure access to the document storage system and the workflow management system, enabling them to review documents, provide feedback, and track progress in real-time.
6. Training & Change Management: The team received training on the new systems and procedures, which included best practices for responding to regulatory inquiries. This training emphasized the importance of accuracy, completeness, and timely communication. The cultural shift towards proactive compliance was emphasized, turning the regulatory response from a reactive, dreaded task into a structured, well-managed process.

The underlying strategic thinking was to shift from a reactive, ad-hoc approach to a proactive, standardized one. This involved implementing technology to streamline processes, but also involved a significant change management effort to ensure that all stakeholders were aligned and committed to the new way of working. The decision framework prioritised data security, process automation, and improved communication.

Technical Implementation

The technical implementation involved the integration of several key tools and technologies:

• Asana Workflow Management System: Asana was selected as the workflow management system due to its ease of use, flexibility, and robust reporting capabilities. Custom workflows were created for each type of regulatory inquiry, defining the specific tasks, assignees, and deadlines involved. Integration with email and calendar systems ensured that team members received timely notifications and reminders.
• Secure Document Storage: A secure, cloud-based document storage system was implemented, compliant with all relevant regulatory requirements. All client records, transaction histories, compliance reports, and other documentation were scanned and uploaded to the system, organized into a logical folder structure. Access controls were implemented to ensure that only authorized personnel could access sensitive information. Encryption was employed both at rest and in transit.
• Standardized Templates: Standardized templates were created for regulatory responses and document requests, using Microsoft Word and Google Docs. These templates included pre-written language, fill-in-the-blank sections, and checklists to ensure completeness and accuracy. The templates were designed to be easily customized to address the specific requirements of each inquiry.
• Data Integration: Data from various sources, including the firm's CRM system, portfolio management system, and compliance software, was integrated into the document storage system and the workflow management system. This integration enabled the compliance team to quickly access the information they needed to respond to regulatory inquiries.
• Key Metrics: The Asana system was configured to track key metrics, such as the time taken to complete each task, the number of inquiries received, and the percentage of inquiries responded to within the required timeframe. These metrics were used to monitor the effectiveness of the new process and identify areas for further improvement.

The workflow management system was configured to automatically trigger tasks based on specific events. For example, when a regulatory inquiry was received, the system would automatically create a new task in Asana and assign it to the appropriate compliance team member. The system would also automatically generate email notifications to keep stakeholders informed of progress.

Calculations were used to track the cost savings resulting from the implementation of the new process. The time savings were multiplied by the hourly rates of the compliance team members to determine the labor cost savings. The reduction in legal fees was also factored into the cost savings calculation. The Return on Investment (ROI) was calculated by dividing the total cost savings by the cost of implementing the new system.

Results & ROI

The implementation of the standardized regulatory inquiry response process yielded significant results for Santos Financial:

• Reduced Response Time by 90%: The average response time for regulatory inquiries decreased from 75 hours to just 7.5 hours. This dramatic reduction in response time significantly improved efficiency and reduced the risk of regulatory scrutiny.
• Reduced Legal Fees by 60%: Due to the improved efficiency and completeness of the responses, the time required for legal review decreased significantly. As a result, legal fees associated with regulatory inquiries were reduced by 60%, saving the firm approximately $9,000 per inquiry.
• Improved Compliance Accuracy: The standardized templates and checklists ensured that all responses were complete and accurate, reducing the risk of errors and omissions. This improved compliance accuracy enhanced the firm's reputation and reduced the risk of regulatory penalties.
• Increased Compliance Team Productivity: The automation of tasks and the streamlined workflow freed up the compliance team to focus on more strategic initiatives. This increased productivity enabled the firm to handle a larger volume of regulatory inquiries without increasing headcount. The freed up time allowed the team to proactively review existing processes and enhance overall compliance posture.
• ROI: The implementation of the new system cost approximately $20,000. With annual cost savings of approximately $67,500 (based on the reduction in legal fees and labor costs), the ROI was 337.5% within the first year.

Specifically, Santos Financial received 5 regulatory inquiries in the 12 months before implementation. It took them an average of 75 hours to respond to each (375 total hours), and their legal fees totaled $75,000. In the 12 months after implementation, they received 6 regulatory inquiries. It took them an average of 7.5 hours to respond to each (45 total hours), and their legal fees totaled $30,000. This represents a substantial improvement in efficiency and cost savings.

Key Takeaways

1. Standardize and automate: Implementing standardized workflows and automating key tasks can significantly improve efficiency and reduce response times.
2. Centralize document storage: A secure, centralized document storage system is essential for ensuring that all relevant information is easily accessible.
3. Leverage technology: Workflow management systems and other technology solutions can streamline regulatory inquiry response processes and improve compliance accuracy.
4. Engage legal counsel early: Involve legal counsel early in the process to ensure that responses are accurate and complete.
5. Track key metrics: Monitoring key metrics can help identify areas for further improvement and demonstrate the effectiveness of the new process.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors streamline compliance processes, improve client communication, and enhance overall operational efficiency. Visit our tools to see how we can help your practice.