Texting is compliance professionals’ biggest concern as the SEC levies over $2 billion in fines over the last year

Teams need greater technical skills to handle the complexity and quantity of digital communications as well as to overcome the strain on resources

Hearsay Systems, the trusted global leader in digital client engagement for the financial services industry, today announced today announced the findings from its 2022 Finserv Compliance Benchmark Report.

This year’s report looks at how compliance teams continue to contend with the challenges posed by digital communications, amid a far more active regulatory landscape. Based on survey findings, financial services firms currently feel constrained by existing resources and often lack the trust or the technical skill to fully leverage automated technologies that could relieve some of their supervisory pain points.

“Between soaring inflation and fears of recession, rising interest rates and an unpredictable stock market, investors need sound financial guidance like never before. Digital channels are imperative for forging quality relationships between financial advisors and their clients,” said Bill Simpson, Compliance Principal at Hearsay Systems. “At the same time, the SEC has made it clear that it has adopted a new posture towards compliant texting, as exemplified by the heavy fines levied against firms. Moving forward, the challenge for firms will be using digital tools to differentiate themselves without running afoul of compliance guidelines.”

Key Findings:

• Texting becomes a problem: Across both reputational and regulatory dimensions, texting was a key source of concern for compliance professionals. This is likely because of the whopping $1.8 billion in fines levied by the SEC related to “off-channel” communications, like texting. Firms realize that their previous texting policies of prohibition are no longer sufficient, and supervision of texting may require significant new volumes of work for already stretched compliance teams.
• More pressure on staffing: Despite the increase in regulatory activity this year, compliance teams remained largely static in size. The pressure for compliance teams to do more with fewer resources can no longer be tolerated moving forward; many firms acknowledge this. In fact, 42% of respondents plan to further increase compliance staffing over the next 12 months—a marked increase in demand compared with 2021.
• To alleviate strain, firms relied on delegation and pre-approvals to get work done: The most prevalent driver for team efficiency was delegation, which 57% of respondents employed, followed by automating workflow routing and improving reporting. Firms that delegate digital communications review to other supervision teams must overcome potential dilution of expertise, particularly when those teams are more generalist in nature—in charge of handling many compliance functions for a smaller group of employees. Today, 94% of firms already pre-approve social media content (slightly higher than last year’s figure of 91%), but there was a marked jump in favorable sentiment towards pre-approval: 41% of respondents found it more relevant than it was 12 months ago, compared with only 23% of respondents last year.
• Structural challenges remain roadblocks: The ability to leverage technology, manage projects, and track regulatory changes were among the weaknesses highlighted by compliance teams in both 2021 and 2022. For 2022, however, procedure and policy writing surfaced as another pressing area of opportunity, likely due to the quickening pace of regulatory change, coupled with the increased scrutiny of digital tools for communication. Teams expressed the need for greater technical skills to help them overcome challenges related to the complexity and quantity of digital communications.

“In the coming year, firms must become more comfortable with updated compliance parameters, whether for texting, or for those put forth in the Modernized Marketing Rule,” said Leslie Leach, Chief Marketing and Strategy Officer at Hearsay Systems. “With Hearsay’s leading compliant texting and mobile solution, and recent expanded support for the use of testimonials and endorsements, firms will be able to efficiently leverage digital engagement tools at scale, while remaining fully compliant.”

Hearsay’s 2022 Finserv Compliance Survey gathered feedback from a random sample of 50 North American compliance leaders, using an online survey tool between August and October 2022. To read the full report, please go to https://www.hearsaysystems.com/resource/hearsays-2022-finserv-compliance-benchmark-report

To learn more about how to build the most compliant and efficient digital communications programs possible, created specifically around the needs of financial services organizations, please visit www.hearsaysystems.com.