Global relay
In December 1992, the world’s first ever text message (“Merry Christmas”) was sent by a British engineer from his computer to an Orbitel 901 mobile phone owned by a Director of Vodafone. He received no response, because there was no way to send a text by phone until 1993.
Fast-forward eighteen years. Many texts sent by investors to their broker-dealer, RIA, investment or relationship manager still receive no response – these days not due to technical limitations, but because the recipient cannot reply without contravening their firm’s no-texting policy. This scenario is far from ideal, given that both clients and financial advisors want to use mobile phones and text messaging to communicate, as an immediate and convenient way of working.
Mobile phone usage is at an all-time high, and text, instant messaging (IM), collaboration tools and social channels have become ingrained in our daily lives. According to recent research, more than 50% of us check our phones 5+ times every hour, nearly 90% of us respond to a text message within 30 minutes, and text messaging is 6x more engaging than email. And while 60% of the workforce use smartphones for work, and another 31% want to, the risks associated with capturing and archiving texts are set to rise.
Who’s fooling who?
Many highly-regulated firms remain steadfast in their resolve to prohibit staff from communicating via text, because they have no system in place to automatically capture, monitor and archive each text. Instead, they rely on “no-texting” policies to safeguard compliance, however this is a dangerous game rather than a solution, because many advisors are not playing by the rules.
Increasingly, the temptation for advisors to flout a no-texting policy is proving too great to resist. Advisors need to respond quickly to clients, without forcing them to switch to an alternate (less convenient) communication channel, and they certainly don’t want to risk delaying a conversation or losing a deal. While they may not set out to disregard compliance intentionally, every financial advisor’s focus is on delivering client experience and revenues. When compliance teams fail to support channels of communication that clients prefer, this can lead to advisors viewing colleagues in Compliance as the “business prevention department.”
The sooner everyone begins batting on the same team, the better for all involved. And the sooner Compliance Officers realize that Regulators already know that a no-texting policy is often ignored, the sooner their focus will switch from policy to technology, to provide the compliant solution.
Reassuring the Regulators
Stringent FINRA and SEC regulations require that all digital communications are captured and stored in accordance with books and records requirements. Supervisors at regulated firms must have systems and processes in place to identify when a registered representative may be communicating through unapproved communication channels, which includes the ability to detect “red flags” that unapproved communications are likely to occur. For example, an email including the phrase “Text me when you want to go ahead” would be a red flag.
The reality is that there is not a “no-texting policy” in the world that will help you with this kind of detection and granular analysis, making policies of this type completely ineffective in ensuring compliance. And, given that it is entirely possible to address electronic communications compliance cost-effectively with technology, any firm that avoids taking this route is opening itself up to unnecessary risk.
How to ensure compliance
Clearly, having a no-texting policy in place is no longer sufficient to guard against fines and sanctions for non-compliance. Today’s compliance priority is to empower investment advisors to perform to the best of their ability, while adopting a holistic, electronic approach to ensuring communications compliance.
Join our webinar to learn how.
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