2012 Report Identifies Top Five Challenges For Broker-Dealers Along With Industry Trends And Best Practices

Monday, September 10, 2012 07:42
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2012 Report Identifies Top Five Challenges For Broker-Dealers Along With Industry Trends And Best Practices

Tags: broker-dealers | independent broker-dealers | regulation

An industry report commissioned by Pershing affiliate Albridge was designed to highlight gaps as well as evolving trends and best practices in the broker-dealer industry. The first report was done in 2010. Beacon Strategies LLC, a strategy and consulting firm, has updated that report for 2012.

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The original report identified the top five challenges broker-dealers face. These were:
  • Sales practice monitoring
  • Regulatory change
  • Suitability review
  • Product education
  • Operational Processes
The top five challenges in 2012 were:
  • Suitability review
  • Sales practice monitoring
  • Regulatory change
  • Product education
  • Social media
Suitability review was the only challenge to advance in importance over the two years. This is a reflection of FINRA’s increased reviews. Fines imposed by FINRA over suitability increased more than 100% from 2010 to 2011.
 
It’s predicted that social media will become an increasing concern over the next few years. The 2012 report also showed an increase in automated compliance systems over a combination of automated systems and eyes-on compliance reviews.
 
2011 also showed industry regulators following through more consistently on warnings for disciplinary action. As a result, compliance departments are growing despite the move toward more automation. Compliance departments within firms are also more visible.
 
Overall, although compliance costs are greater for smaller firms, the report noted that compliance costs should not exceed 7% of a firm’s budget.
 
Other trends from the report can be accessed here. Overall, the report shows that regulators are having the greatest impact on the industry, yet the stodginess of industry participants in adopting new and better practices is not necessarily going away.
 

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