New Horizons Reduces Advertising Compliance Review Time by 50%

New Horizons Reduces Advertising Compliance Review Time by 50%

Executive Summary

New Horizons, a rapidly growing RIA managing over $750 million in assets, faced significant bottlenecks in their advertising compliance review process. This manual, time-consuming procedure hindered their ability to launch timely marketing campaigns, limiting their growth potential. By adopting a digital advertising compliance platform, ComplianceWire, and implementing standardized review processes, New Horizons slashed their advertising compliance review time by 50%, leading to faster campaign launches and a measurable 20% increase in marketing campaign effectiveness.

The Challenge

New Horizons experienced exponential growth over the past five years, fueled by a strong marketing strategy. However, their existing manual compliance review process was struggling to keep pace. The process involved printing out marketing materials, physically routing them to compliance officers, awaiting manual review and markups, and then repeating the process multiple times as materials were revised.

Specifically, the challenges included:

• Excessive Review Time: Each advertising piece, including website content, social media posts, client newsletters, and seminar promotions, took an average of 5 business days to be approved, stretching out campaign launch timelines considerably. In some cases, time-sensitive market commentary was delayed and less effective due to compliance backlogs.
• Increased Risk of Non-Compliance: The manual review process was prone to human error. Ensuring every claim, statistic, and disclosure was accurate and compliant with SEC Rule 206(4)-1 (the Advertising Rule) and other regulations was a major concern, leading to potential regulatory fines and reputational damage. A single compliance error could result in a fine of $5,000 to $10,000 per instance by regulators, according to industry estimates.
• Bottleneck in Marketing Operations: The compliance review process created a bottleneck for the marketing team, delaying the launch of new campaigns and hindering their ability to capitalize on market opportunities. The team projected an inability to execute on $25,000 worth of paid advertising efforts in the upcoming quarter because of the current process, hindering projected new client acquisition.
• Lack of Audit Trail: The manual process lacked a comprehensive audit trail, making it difficult to track changes, identify potential compliance issues, and demonstrate compliance to regulators during audits. Maintaining a complete record of all advertising materials, versions, and approval history was difficult and time-consuming. A compliance audit by the SEC costs firms, on average, $20,000 in internal personnel costs, and lack of adequate records can increase this burden.
• Scalability Issues: As New Horizons continued to grow, the manual compliance process became increasingly unsustainable. The firm projected a need to hire an additional compliance officer within the next year simply to handle the increasing volume of marketing materials requiring review, leading to additional salary expenses of approximately $100,000 per year.

The Approach

New Horizons recognized the need for a more efficient and robust advertising compliance solution. After evaluating several options, they decided to implement ComplianceWire, a digital advertising compliance platform designed specifically for financial services firms. The strategic approach involved the following steps:

1. Needs Assessment: New Horizons started by conducting a thorough assessment of their existing compliance process, identifying pain points, and defining specific requirements for a new solution. This involved interviewing marketing team members, compliance officers, and senior management to understand their needs and concerns.
2. Platform Selection: After evaluating several platforms, ComplianceWire was selected based on its comprehensive features, ease of use, and ability to integrate with existing marketing tools. The platform offered automated workflows, built-in compliance rules, audit trails, and reporting capabilities.
3. Process Standardization: New Horizons standardized its advertising compliance review process, creating clear workflows and approval criteria. This involved defining specific roles and responsibilities for marketing team members and compliance officers, and establishing clear guidelines for creating and reviewing marketing materials. They created a Compliance Review Checklist that detailed every required disclosure for different material types, including disclaimers related to investment risk and performance projections.
4. Workflow Automation: The marketing team worked with ComplianceWire to automate the review process, enabling them to submit marketing materials directly to compliance officers through the platform. The platform automatically routed materials to the appropriate reviewers, tracked progress, and provided notifications when approvals were required.
5. Integration with Project Management System: To streamline the process further, New Horizons integrated ComplianceWire with their existing project management system. This allowed marketing team members to track the status of compliance reviews directly within their project management workflows, improving communication and collaboration.
6. Training and Education: New Horizons provided comprehensive training and education to all marketing team members and compliance officers on the new platform and standardized processes. This ensured that everyone understood their roles and responsibilities, and that they were comfortable using the new system.
7. Ongoing Monitoring and Improvement: New Horizons established a process for ongoing monitoring and improvement, tracking key metrics such as review time, error rates, and compliance violations. This allowed them to identify areas for improvement and make adjustments to the system and processes as needed.

Technical Implementation

The technical implementation of ComplianceWire and the standardized review process involved several key steps:

• Platform Setup and Configuration: ComplianceWire was configured to reflect New Horizons' specific compliance requirements and workflows. This included setting up user roles and permissions, defining approval rules, and customizing the platform's interface. The platform's algorithms were fine-tuned to reflect all applicable regulations regarding advertising and sales literature, particularly SEC Rule 206(4)-1 and FINRA Rule 2210.
• Data Migration: Existing marketing materials and compliance records were migrated to the ComplianceWire platform. This ensured that all relevant information was readily accessible within the new system.
• Workflow Integration: ComplianceWire was integrated with the marketing team's project management system (Asana) using API connectors. This allowed marketing team members to submit materials for review directly from their project workflows, and to track the status of reviews in real-time. The API calls automatically updated project statuses in Asana, providing transparency and eliminating the need for manual updates.
• Automated Rule Checks: ComplianceWire was configured with automated rule checks based on SEC and FINRA regulations. These checks automatically flagged potential compliance issues, such as unsubstantiated claims or missing disclosures, allowing compliance officers to address them proactively. For example, the platform's AI identified instances where the firm's GIPS-compliant returns were not displayed in the required format.
• Audit Trail Implementation: The platform automatically generated a comprehensive audit trail for all advertising materials, tracking all changes, approvals, and communications related to each piece. This audit trail provided a clear record of compliance activities, which was invaluable for demonstrating compliance to regulators during audits. The system stored all versions of each document, along with the timestamp and user ID for each modification.
• Metrics and Reporting: Customized reports were set up within ComplianceWire to track key performance indicators (KPIs) such as review time, error rates, and compliance violations. These reports provided valuable insights into the effectiveness of the compliance process and allowed New Horizons to identify areas for improvement. These reports tracked the average number of days to approval for different types of marketing materials, the number of compliance errors identified, and the time spent by compliance officers on review activities.

To calculate the ROI, New Horizons used the following formula:

ROI = ((Benefit - Cost) / Cost) * 100

Where:

• Benefit: The total cost savings and increased revenue generated by the new system. This includes reduced compliance review time, improved marketing campaign effectiveness, and avoided regulatory fines.
• Cost: The total cost of implementing and maintaining the new system, including software licenses, implementation services, and training.

Results & ROI

The implementation of ComplianceWire and the standardized review process yielded significant results for New Horizons:

• Reduced Advertising Compliance Review Time by 50%: The average review time for advertising materials decreased from 5 business days to 2.5 business days, enabling faster campaign launches and improved marketing agility. The implementation reduced the approval time from an average of 120 hours per month to 60 hours per month.
• Increased Marketing Campaign Effectiveness by 20%: Faster campaign launches and improved targeting resulted in a 20% increase in marketing campaign effectiveness, measured by the number of leads generated and the conversion rate of leads to clients. The firm estimated that the accelerated marketing cadence contributed to an additional $100,000 in revenue during the first year.
• Reduced Risk of Non-Compliance: The automated rule checks and audit trails significantly reduced the risk of non-compliance, minimizing the potential for regulatory fines and reputational damage. The platform identified and prevented an estimated 5 potential compliance violations per month.
• Improved Compliance Officer Efficiency: Compliance officers were able to spend less time on manual review tasks and more time on strategic compliance initiatives. The firm estimated savings of approximately 30 hours per month in compliance officer time, which could be reallocated to other important compliance functions.
• Scalability: The new system provided a scalable solution that could accommodate New Horizons' continued growth without requiring additional compliance staff. The platform provided the ability to scale operations by handling 50% more advertising material requests, with no additional personnel requirements.

Specific metrics:

• Advertising materials reviewed per month (Before): 40
• Advertising materials reviewed per month (After): 60
• Average Review Time (Before): 5 days
• Average Review Time (After): 2.5 days
• Marketing qualified leads per month (Before): 50
• Marketing qualified leads per month (After): 60
• Estimated regulatory fines avoided (Year 1): $25,000
• Implementation Cost (ComplianceWire License & Implementation): $15,000

Based on these figures, New Horizons estimated that the ROI of implementing ComplianceWire was approximately 250% within the first year.

Key Takeaways

For other RIAs and wealth management firms facing similar advertising compliance challenges, the following key takeaways can be gleaned from New Horizons' experience:

1. Embrace Technology: Invest in a digital advertising compliance platform to automate and streamline the review process. This will not only reduce review time but also minimize the risk of non-compliance.
2. Standardize Processes: Create clear and standardized advertising compliance workflows with defined roles and responsibilities. This will improve efficiency and consistency.
3. Integrate Systems: Integrate your compliance platform with existing marketing tools to streamline communication and collaboration. This will improve the overall efficiency of your marketing operations.
4. Prioritize Training: Provide comprehensive training to all marketing team members and compliance officers on the new platform and processes. This will ensure that everyone understands their roles and responsibilities, and that they are comfortable using the new system.
5. Monitor and Improve: Continuously monitor and improve your advertising compliance process by tracking key metrics and making adjustments as needed. This will ensure that your process remains effective and efficient.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors automate tedious tasks and improve compliance workflows. Visit our tools to see how we can help your practice.