Picture Tom, product manager for a large broker-dealer. Tom has his annual cycle exam in a couple of days. He understands how his orders have been approved and placed through his firm’s current system but is starting to get nervous that their fixed-income training won’t be enough to cover structured products if FINRA chooses such an order to audit.
Fast forward to the exam. Tom’s order audit was for a structured product review and he needs to provide FINRA with a trade-approval log and be able to document a proper product training program for the advisor who placed the trade. Luckily, after several hours of anxiously searching through his emails and spreadsheets, he was able to find the log, which was satisfactory for FINRA. However, the fixed-income training program was insufficient for the required suitability measures. Tom’s firm got slapped with fines and now they need to figure out how to quickly construct guard rails to prevent this from happening again.
If this scenario sounds familiar, you’re not alone. Equipping advisors with proper education and training on selling structured products can be a challenging task for product managers and compliance teams. Many firms have implemented a generalized training program that broadly covers structured products through fixed-income investments, but often it isn’t enough. With suitability fines on the rise, investment firms should take a deep look into their own measures to ensure compliance is being maintained.
Structured products platforms help investment firms and people like Tom overcome this through three key-features: educational training and resources, compliance testing and certification, and trade-approval logs.
Education Training and Resources
By having an inclusive online library that trains advisors on product-specific solutions and structured investment concepts, advisors are better-prepared to present complex investments. From income solutions, growth strategies, to product-specific training, financial technology can create and structure an education program tailored around a specific goal.
Compliance Testing and Certification
Financial technology simplifies the process of product restriction through educational barriers that require advisors to earn a certification before they can start selling certain products. By precluding advisors from accessing and selling certain products through broker-approved training and certification tests, product managers and compliance teams can better ensure advisors are certified and trained in the products that they are selling.
Trade-Approval Logs and Digital Archive System
Top platforms should have a digital archive system that creates trade-approval logs. These logs document the entire process with comments, acknowledgements, and documentation, making it much easier to pull up previously placed trades and gather historical data needed for control and compliance purposes.
Through the three features listed above, product managers and compliance teams have been able to manage their audits with speed and ease due to the safe guards created by financial technology.
Don’t be like Tom and let your firm become another statistic in suitability-related fines while other firms are easily improving their suitability measures with financial technology. Learn more about Luma’s Education and Training module today.
This information is for distribution to institutional clients and is for broker-dealer use only. It is not intended to be distributed to individual retail clients. Any material provided is for information only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security or financial instrument.