Advisors: does your compliance officer feel like the police?
Be honest. Do you change your behavior when they walk in the room? Does a call out of the blue make your stomach drop?
If so, it’s worth asking why.
The comparison isn’t entirely off. Police and compliance both exist to protect: individuals from each other, and the community (or firm) from the few who put it at risk. But compliance officers spend very little of their time policing. And much of that time is spent defending advisors and the firm from clients.
Most of the job is making sure they never have to act like the police. They build policies, procedures, and controls to support you and to make sure they can defend you. It’s only when those are ignored or bypassed that the role changes.
A good compliance department feels different. It feels like trusted counsel.
Think of your CPA or your attorney. You call them before you make the move. You’re transparent because you know they can only protect what they know about. They want to keep you out of violations, penalties, and the next headline. Follow their guidance, and they’ll stand behind you.
Early in my career, I was told the measure of a compliance department is simple:
Who calls who first?
📞 When advisors call compliance first, you have trusted counsel.
🚨 When compliance calls advisors first, you’re starting to look like an investigation.
Fostering this dynamic of trusted counsel should be a top priority for compliance (whether in-house or outsourced) and senior management. Doing so provides the groundwork for a relationship that supports business while keeping advisors and the firm protected.
To dig a bit deeper, there are several reasons driving these misperceptions.
Why can compliance sometimes feel like the police.
The compliance officer historically has gotten a bad rap. For many advisors who started at larger firms and are truly just looking to help their clients, the compliance team was often the department of “no”, the “sales prevention team” or the “big brother” that was watching every move. Some of those things are true, but it’s not always the compliance officer’s fault.
Several factors can cause this to happen:
1. As advisory firms grow, they must remove much of the flexibility inherent in the regulations to allow for scale, streamlining, and policy alignment across the multitude of other departments. And often compliance gets to be the scapegoat for the restrictive policies across the firm. But those policies are driven by business decisions, not regulation.
Bigger firms mean more departments, more perspectives and the need for greater alignment. As the firm grows, protection of the firm becomes more important than the needs of each individual advisor. This leads to more policies, stringent procedures, and less wiggle room for judgement calls. Added rules introduce a new component, with more policies comes the need for more controls and supervision. Enforcing firm policy becomes a compliance matter under the supervision rule, even if the underlying policy was not specifically required by regulation.
2. Advisor autonomy is the next biggest driver, specifically for larger advisory firms like aggregators. While “autonomy” sounds like less policy and oversight, the structure itself will create friction. Regulation is no different for these firms than any other. The rules are the same. Ensuring hundreds of advisers are all compliant when they all manage money differently, market differently, and service clients differently results in supervisory system that doesn’t neatly fit each advisor’s practice. They will have to go through training that may not apply to them or respond to a compliance inquiry that was designed for someone else. This creates friction and will make compliance feel like police.
3. The biggest factor is management buy-in. The “Tone at the top” is real. If senior and mid-level managers don’t see compliance as a resource, no one will.
How to change the perception.
1. As mentioned above – management buy-in is the biggest driver. Having the executives echo the truth from the main stage – “Compliance is there to protect everyone at the firm, through guidance, support, and guardrails. They are your advocates and counsel!”
2. Face time and candor – from both sides.
For compliance personnel - sit across from advisors. Asking how they provide value to the clients should be the foundation of any office review. Our industry stems from that relationship, ask questions about worries they have or friction points they are experiencing. This will arm you with valuable perspective. Solicit feedback on new controls or procedure that are needed.
For advisors – ask why. Every rule, every policy, every control has a reason. Most of those come from regulation written to address clients who were really harmed, and those stories resonate and provide color. Every compliance team member should be able to explain the “why.” Sometimes the “why” is resource constraints, other times, there is a directive from senior management. Understand that compliance only has so much power in reducing friction. Don’t lose sight that the work they do is designed to defend you.
3. Strategy – offering everything to everyone all at once will create a disaster from a compliance, risk, and operational perspective. As firms grow, services typically deepen, and departments widen. The need for policies grows. The trap is thinking that the compliance department will scale by growing at a slower pace than the rest of the firm. That is not always the case. For a streamlined firm with limited types of business, yes. For a complex, open architecture firm pursuing M&A, the case is wildly different. You will need to resource compliance in line or greater than firm growth.
The vast majority of advisors are good people that want the best for the clients. The vast majority of compliance personnel want to support and defend good advisors. Ensuring a solid partnership between the two is the foundation for a successful advisory firm.
