CRM2 paperwork overload creates compliance nightmare

CRM2 paperwork overload creates compliance nightmare

CRM2 paperwork overload creates compliance nightmare Financial advisors generally don’t agree on much but when it comes to the subject of paperwork, they definitely see eye-to-eye.

At the heart of the matter is the general belief that compliance has run amok. Tom Caldwell basically said as much in his IIAC speech at the Empire Club January 8.  

Recently, WP had the opportunity to speak off the record with a veteran financial advisor with more than 10 years of industry experience about the biggest stumbling blocks to a healthy business.

Without hesitation the advisor put the blame on CRM2 and the compliance nightmare this well intended three-year initiative has brought upon everyone working in the industry.

In this new era of regulatory bureaucracy that’s verging on political correctness, disclosure forms are required for almost everything a financial advisor does in their day-to-day duties. Rent an office? The client must be made aware of this fact. In addition, they must sign a form acknowledging they’ve been told about this fact.

In what situation could the fact an advisor rents an office (doesn’t everybody?) lead to chicanery or poor advice? There seems no correlation between the two which reduces the amount of time an advisor can spend educating and informing clients about their specific financial situations. From the client perspective it borders on the absurd.

How could this possibly be in their best interest?

An unsubstantiated tidbit: JPMorgan employs 17,000 compliance employees. That’s bigger than many Fortune 500 companies.

The concern of this industry veteran is that any potential cost savings that might occur as a result of fees being fully disclosed including the dollar amount of compensation an advisor receives will be offset by the increased costs resulting from the reams of paper created and additional employees required to deal with the reality that is post-CRM2.

In other words CRM2 is cutting off its nose to spite its face.

The intentions might have been good but in the eyes of at least one advisor, the results will be anything but good. 
3 Comments
  • Brad jardine 2015-01-15 12:49:01 PM
    Amen, regulators win, new "busy work" employees win...but clients, advisors... we lose again
    Post a reply
  • Barb White 2015-01-15 12:53:54 PM
    I'd be interested in knowing whether your readers think the increased paperwork is due to (click as many as apply):
    1. the increasingly litigious legal system as much of this extra paper is because of legal liability from clients and their lawyers
    2. fear of the examiner
    3. the desire to confuse the client?

    Personally, I'd check 1 and 2.
    Post a reply
  • Indy Mac 2015-01-15 1:50:29 PM
    Barb, I would check;

    4. All of the above.
    and
    5. Create so much bureaucracy that only firms the size of JP Morgan (aka the big FIs,) can survive.
    Say goodbye to the Independent firms and hello to proprietary products being the name of the game.

    Best wishes to the Client and impartiality when that happens...
    Post a reply