Compliance is everyone’s business

A culture of compliance must originate from the board and CEO of every financial advisory firm within the financial services industry and this must be clearly relayed to the rest of the team. The ‘tone from the top’ is crucial and can spell the difference in determining the successful integration of a compliance culture into financial advice firms - be they big or small.

A firm’s CEO is the “face of the organisation, the figurehead to whom employees ultimately look for vision, guidance, and leadership,” Deloitte says in a report on world-class ethics and compliance published in 2015. “The tone at the top sets an organisation’s guiding values and ethical climate. Properly fed and nurtured, it is the foundation upon which the culture of an enterprise is built.”

A June 2017 Finra report has its chairman stating that a compliance officer should be held in high regard in any financial advisory firm and should be considered among the senior leaders. The chairman commented that “Advisory firms should never underestimate the importance of gaining and maintaining their clients’ trust. Most of the calamities we’ve seen in our industry started from the top,” he said, referring to a weak compliance culture emanating from either the CEO or senior managers. He stressed the point that people in the advisory industry should stop thinking of the answer to the question, “What’s in it for me?” and instead think of what’s in it for their clients, he said. “Compliance should be a natural part of the conversation. It should be in the DNA of every firm.”

Deloitte notes that reputational risks are at least as great as strategic, operating and financial risks.

“Sometimes all it takes is a rumour or hint of impropriety or malfeasance, or a social media post gone viral, to negatively impact shareholder value and damage - or worse, destroy - corporate and brand reputations in an instant.”

CEOs and senior managers must find ways to connect with people inside and outside their organisations, and openly communicate their values on an ongoing and transparent basis, Deloitte says.

“People are suspicious of leaders who are closed about their values or standards. Stakeholders assume if you value nothing, you’ll value anything,” Deloitte says. “While leaders must establish core values and principles, a CEO’s behaviour tells employees what counts, and what’s rewarded and punished. Unfortunately, many companies under-communicate values by a significant factor.”

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