Boosted Advertising Review Efficiency by 50%: FINRA Compliance

Boosted Advertising Review Efficiency by 50%: FINRA Compliance

Executive Summary

Reeves Institutional, a growing RIA firm, struggled with a manual and time-consuming advertising review process, increasing their risk of FINRA non-compliance. Golden Door Asset designed and implemented a streamlined digital workflow incorporating automated compliance checks and approval routing. This solution slashed advertising review time by 50%, reduced compliance errors by 30%, and delivered an estimated $10,000 in annual cost savings.

The Challenge

Reeves Institutional, managing over $500 million in assets for high-net-worth individuals, recognized the critical importance of compliant advertising materials. However, their existing manual process for reviewing advertisements was proving increasingly burdensome and risky. The process involved multiple stakeholders, including marketing, compliance, and legal teams, each requiring physical copies of advertisements and manually comparing them against FINRA advertising rules.

The challenge manifested in several critical areas:

• Time-Consuming Reviews: Each advertisement, whether a social media post, website banner, or printed brochure, took an average of 5 business days to be fully reviewed and approved. This sluggish pace hindered marketing campaigns and delayed critical client communication. During peak marketing seasons, like the end of the year when tax planning advertisements were prevalent, the backlog would swell, delaying crucial communications and potentially missing market opportunities.

• Increased Risk of Non-Compliance: The manual nature of the review process meant that compliance relied heavily on individual knowledge and attention to detail. With the constant evolution of FINRA advertising rules, which saw an average of 3-4 significant updates annually, the risk of human error was substantial. A single instance of non-compliant advertising, such as a misleading performance claim or an improper disclosure, could trigger a FINRA investigation, leading to hefty fines ranging from $5,000 to $50,000 per violation, along with reputational damage.

• Inefficient Resource Allocation: The manual review process consumed significant time and resources from the compliance team, diverting their attention from other critical tasks, such as conducting internal audits and developing compliance training programs. The firm estimated that the compliance team was spending approximately 25% of their time solely on advertising review, translating to an estimated $15,000 in salary expenses annually.

• Lack of Audit Trail: The absence of a centralized, digital system made it difficult to track the progress of advertisement reviews and maintain a comprehensive audit trail. This made it challenging to demonstrate compliance during FINRA audits and identify areas for process improvement. Locating previous versions of advertisements and tracking approval history could take hours, further exacerbating inefficiencies.

• Difficulty in Scaling: As Reeves Institutional continued to grow, the manual advertising review process became increasingly unsustainable. The firm realized that they needed a more efficient and scalable solution to effectively manage their advertising compliance obligations.

The Approach

Golden Door Asset adopted a multi-faceted approach to address Reeves Institutional's advertising review challenges, focusing on streamlining the process, automating compliance checks, and improving transparency.

1. Process Mapping and Analysis: We began by conducting a comprehensive process mapping exercise to identify bottlenecks and inefficiencies in the existing advertising review workflow. This involved interviewing key stakeholders from the marketing, compliance, and legal teams to understand their roles, responsibilities, and pain points. The analysis revealed that the multiple handoffs and manual data entry were the primary causes of delays and errors.

2. Digital Workflow Design: Based on the process analysis, we designed a customized digital workflow using Microsoft SharePoint. The workflow incorporated the following key features:

   • Centralized Submission Portal: A user-friendly portal for marketing personnel to submit advertisements for review. The portal captured essential information, such as the target audience, distribution channels, and the intended duration of the advertisement.

   • Automated Compliance Checks: Integration with FINRA's Advertising Regulation Department's website to automatically cross-reference advertisement content against current FINRA rules and regulations. This included automated checks for misleading performance claims, unsubstantiated statements, and inadequate disclosures. Specific checks included comparing advertised returns against standard benchmarks like the S&P 500 over various time horizons to highlight potential performance biases.

   • Automated Approval Routing: Intelligent routing of advertisements to the appropriate reviewers based on content and risk level. For example, advertisements containing performance data were automatically routed to the compliance team for review.

   • Digital Audit Trail: A comprehensive digital audit trail that tracked all review activities, including reviewer comments, approval dates, and version history.

   • Automated Notifications: Real-time notifications to keep reviewers informed of new submissions and pending tasks.

3. Compliance Rule Integration: We developed custom algorithms to parse FINRA’s advertising guidelines and translate them into automated compliance checks. This included:

   • Disclosure Requirements Analysis: Ensuring all required disclosures were present and conspicuously displayed based on the type of advertisement and the information presented. This covered disclosures related to conflicts of interest, fees, and past performance.

   • Performance Data Verification: Automatically verifying the accuracy and completeness of performance data, including comparing advertised returns against standardized benchmarks and ensuring appropriate disclaimers were included.

   • Prohibited Language Detection: Identifying and flagging potentially misleading or prohibited language in advertisements, such as guarantees or promises of specific investment outcomes.

4. User Training and Support: We provided comprehensive training to all users on the new digital workflow, including how to submit advertisements, conduct reviews, and track progress. Ongoing support was provided to address user questions and resolve any technical issues.

Technical Implementation

The implementation involved a custom solution built on Microsoft SharePoint Online, leveraging its workflow automation capabilities. Key technical aspects include:

• SharePoint Online Customization: Customized SharePoint lists and libraries to manage advertisement submissions, reviews, and approvals.

• Microsoft Power Automate: Used Power Automate to create automated workflows that routed advertisements to the appropriate reviewers based on pre-defined rules and criteria. For example, advertisements referencing specific investment products (e.g., municipal bonds) were automatically routed to reviewers with expertise in those areas.

• API Integration: Developed custom API integrations with FINRA's Advertising Regulation Department's website to automate compliance checks and retrieve the latest regulatory updates. The integration utilized web scraping techniques and natural language processing (NLP) to extract relevant information from FINRA's website and translate it into actionable compliance rules. This included regularly updated lists of prohibited terms and disclosures.

• Data Security: Implemented robust security measures to protect sensitive data, including encryption, access controls, and regular security audits. Data was encrypted both in transit and at rest, and access was limited to authorized personnel only.

• Reporting and Analytics: Developed custom reports and dashboards to track key performance indicators (KPIs), such as review time, error rates, and compliance status. The dashboards provided real-time visibility into the advertising review process and enabled the compliance team to identify areas for improvement.

• FINRA Rule Database: A regularly updated database of FINRA advertising regulations was created and integrated into the workflow. This database acted as a 'source of truth' for all compliance checks, ensuring consistency and accuracy across all advertisement reviews. The database incorporated rule effective dates, allowing the system to correctly interpret and apply regulations based on the publication date of each advertisement.

Results & ROI

The implementation of Golden Door Asset's streamlined advertising review process yielded significant results for Reeves Institutional:

• Reduced Advertising Review Time by 50%: The average time to review and approve an advertisement decreased from 5 business days to 2.5 business days, accelerating marketing campaigns and improving time-to-market.

• Decreased Compliance-Related Errors by 30%: The automated compliance checks significantly reduced the risk of human error, resulting in a 30% decrease in compliance-related errors. This reduced the likelihood of FINRA investigations and associated fines.

• $10,000 Annual Cost Savings: The reduced review time and improved efficiency freed up valuable time for the compliance team, allowing them to focus on other critical tasks. This resulted in an estimated $10,000 in annual cost savings, based on a 10% reduction in compliance team workload.

• Improved Audit Trail: The digital audit trail provided a comprehensive record of all review activities, making it easier to demonstrate compliance during FINRA audits and identify areas for process improvement. Finding historical advertisement versions now takes minutes instead of hours.

• Increased Scalability: The new process is highly scalable, allowing Reeves Institutional to effectively manage its advertising compliance obligations as the firm continues to grow. The system can handle a 50% increase in advertisement volume without requiring additional staffing.

• Improved Compliance Confidence: The automated system improved the confidence of the Reeves Institutional team and provided peace of mind that all advertising materials were compliant with current regulations.

Key Takeaways

1. Embrace Automation: Automating compliance checks and approval routing can significantly reduce review time and minimize the risk of errors.

2. Centralize Data: Creating a centralized, digital repository for all advertising materials and review records provides a comprehensive audit trail and improves transparency.

3. Integrate with Regulatory Resources: Integrating with regulatory websites and databases ensures that compliance checks are always up-to-date and accurate.

4. Invest in Training: Providing comprehensive training to all users on the new process ensures that they understand how to use the system effectively and comply with regulations.

5. Monitor and Optimize: Continuously monitor key performance indicators (KPIs) and identify areas for process improvement to ensure that the advertising review process remains efficient and effective.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors automate compliance, personalize client communications, and uncover hidden growth opportunities. Visit our tools to see how we can help your practice.