Mitigating Broker Dealer Miscommunication Across Your Front, Middle and Back Office

Increased miscommunication between broker dealer functions across the front, middle and back office has become a growing problem, especially among compliance employees.

According to broker dealer placement firm Cross-Search, a third of financial advisors who exit their broker dealers leave due to conflict or miscommunication with their compliance department, highlighting clear gaps between various broker dealer operations.

If compliance officers aren’t being completely upfront with broker dealer traders and analysts, conflicts can easily arise. Installing a compliance solution can smooth out communication between all lines of a broker dealer business.

Sources of Broker Dealer Miscommunication

The lack of cooperation between the front, middle and back office of broker dealer operations can be attributed to several culprits:

  • Inefficient or manual processes. Often, middle and back office functions require large amounts of paperwork that can be time-consuming if filled out manually. Additionally, there is a higher probability of mistakes being made when forms are completed by hand.

  • Outdated technology. Currently, several firms use antiquated systems in the middle and back offices that are costly and inefficient. Newer technologies offer shared utility, multi-tenant models that take advantage of Cloud technology and are better suited for back office functions.

  • Lack of cohesive, firm-wide systems. Traditionally, focus is placed on front office operations, including up-to-date technology, well-paid analysts and advanced reporting and modeling techs. The middle and back office systems need to be upgraded as well for a more holistic coordination of business operations.

The existence of such communication gaps presents a significant obstacle to broker dealer firms. For instance, inefficient processes can cause extensive delays that can open the doors to regulatory violations to occur before they can be corrected.

The Advantages of Automated Solutions and Better Communication

Choosing to streamline broker dealer operations by implementing a SaaS solution benefits all aspects of a firm, and allows for clearer communication across the front, middle and back offices.  There are several advantages offered by automated compliance software for all parties:

  • Improved ability to meet regulations
    Automated solutions let firms more easily meet standards set by regulators SEC and FINRA. One example is FINRA Rule 3130, which requires that firms put into place reliable oversight procedures, including extensive logs of communications between compliance officers, executives and analysts, traders and brokers.
  • Reduced conflict
    Compliance software helps prevent firms from making regulatory missteps that can lead to fines, terminations and lost clients. Additionally, compliance solutions preserve and protect a firm’s reputation. According to a report by Cerulli Associates, nearly 20 percent of investors cite trust as the primary factor in choosing a firm, an increase from nearly 15 percent the previous year. A regulatory misstep as a result of a miscommunication between a compliance officer and a trader can result in irreparable damage to a firm’s reputation.
  • Better communication
    Automated solutions facilitate smoother communication between compliance employees and advisors, helping prevent problems before they arise. The automated oversight provided by compliance software reduces the workload required of advisors in adhering to regulations, and also corrects mistakes. This added supervision increases the efficiency of the compliance department as a whole. Exception reporting actively alerts compliance officers to potential problems.
  • Electronic data logs
    As an added benefit, automation provides electronic data logs, which allows for faster and more reliable communication between advisors and the compliance department.

Overall, miscommunication in a broker dealer firm can be mitigated with the help of an automated compliance solution that not only unifies operations, but also increases open communication between firm employees. Implementing compliance software will enhance your firm’s ability to adhere to regulations and reduce the risk of legal consequences.