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How to Survive Your Broker-Dealer Compliance Audit

by | Sep 30, 2019 | Blog

If you are a financial advisor affiliated with an independent broker-dealer, you can likely expect to see an auditor every year. While each broker-dealer is different, compliance audits seek to keep advisors and their clients protected. There’s no doubt that a notice of an upcoming compliance exam can cause some anxiety. Want to know how to survive your next annual broker-dealer audit? For the answer, we turned to our broker-dealer compliance professional, Neil Lance.

“The best way to survive your annual broker-dealer audit is not to go it alone,” explained Lance, Director of Compliance for Financial Advocates. “We prepare our advisors to be audit-ready from the word GO.”

Lance also explained that because of their established relationship with LPL, they are notified in advance of the upcoming audit to start the process for the advisor.  “We have established a cooperative process with the auditors allowing us to get the ball rolling weeks before the audit is scheduled on-site,” said Lance. Once notified of an upcoming audit, Lance’s team provides the auditor with remote access to the advisor’s files through Docupace. Financial Advocates then works directly with the examiner to accomplish as much as possible in advance, which significantly shortens the time the auditor spends on-site at the advisor’s office.

Another way an advisor can better prepare for their annual compliance audit is to know the broker-dealer’s compliance priorities in advance. Lance and his team have existing relationships with the broker-dealer’s auditors, which provides advisors affiliated with Financial Advocates another advantage. “Every day, we are working with home office compliance. We know what the auditors are laser-focused on and we are preparing our advisors in advance,” said Lance.

This year, Lance’s team is making sure their advisors have checked off the following four items in advance of their audit.

  1. A business continuity plan exists, is complete and current.
  2. All electronic devices meet the stringent broker-dealer standards for encryption, password protection, screen time outs, and more.
  3. All annuity delivery receipts are on file.
  4. All social media accounts have been reported and are monitored following the broker-dealer’s protocols.

Advisors are busy, so the list above can seem overwhelming. Lance explained how Financial Advocate’s multiple business units work together to help the advisor meet their audit requirements. “For example, if an advisor is unsure of their systems’ encryption, our IT team will log in remotely to the advisor’s desktop to make sure things are in good order,” said Lance. “We have the assistance of several business units here to help us ensure our advisors are ready no matter what the need.”

Financial Advocates’ compliance team also provides support with state audits. Regardless of the auditor, Lance offers this advice to advisors notified of an upcoming audit. “Try to keep a positive perspective throughout the process. Remember, the goal of any audit is to make sure you avoid mishaps and unnecessary or costly legal implications, so you can keep serving your clients.”

Audits are always less stressful when you do not have to go it alone.  Visit us here to learn more about Financial Advocates’ Personalized Regulatory Compliance support and OSJ guidance.

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The investment professionals associated with this site are registered representatives of LPL Financial. Securities offered through LPL Financial, Member FINRA/SIPC. Financial Planning and Investment advice offered through Financial Advocates Investment Management, a registered investment advisor. Financial Advocates Investment Management and Financial Advocates are separate entities from LPL Financial.

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