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Finding and Hiring A Five-Star Compliance Specialist

A Yelp-for-compliance solution exists and will soon have competition. But is regulatory adherence too important to depend on ratings and outsiders?

Today, firms in need of regulatory assistance often turn to their fellow advisors or a ubiquitous search engine—a model ripe for disruption, says a new technology company. As the gig economy, with its legions of on-demand drivers, home repair professionals, and even movers, continues to make waves, compliance and regulation are starting to see changes, too.

Regulatory technology startup Complect is hoping to change the way that advisors search for and hire compliance help. The aggregator company was co-founded last year by a former consultant and former investment banker, who began promoting their service in April, and the team brought on a fintech advisor as a board member a few weeks ago, Their goal is to be the visible marketplace for advisors and compliance consultants to meet and exchange services. But building an aggregation business can be challenging: The service is ultimately dependent upon the pool of specialist talent it can attract, as well as how readily it can draw in businesses who need the help.

Hahn Nguyen, Co-founder and CEO of Complect

Complect CEO Hanh Nguyen is confident the time is ripe for a service like the one she’s offering. Having consulted for ACA Compliance Group, she saw firsthand the inefficiencies in an advisor-compliance marketplace that often relied on word-of-mouth or search engine-provided referrals. “For a lot of advisors, they don’t even know where to start,” she said. “There’s no marketplace platform or Yelp-style review system where they say, ‘These people are good because they’ve been rated and reviewed for this specific type of work.’ It’s a very fragmented market and a very fragmented industry and there’s just no transparency in it.”

Nguyen envisions companies posting their needs and budgets on Complect and compliance specialists sorting through posts to find good gigs. Those specialists who submit their resumes for review must have at least 3 years’ compliance experience. There is no bidding and each party in the transaction shoulders some of Complect’s finder’s fee, which starts at 10 percent of the job’s cost and will eventually fall to as low as 6 percent depending on the volume of transactions completed on the platform. As the pool of potential jobs and potential specialists grows, the marketplace becomes more efficient and transparent.

If it sounds like a dating service for advisors and compliance professionals, that’s a fair assessment according to Complect. “Much like dating apps, it’s all a numbers game,” noted the company on its site. Specialists can “bolster the number of projects [they] will be eligible to apply for” by adding to their credentials, while both parties can facilitate the matching process by utilizing a “skills hashtag system” that serves as a shortcut to finding a qualified expert. “The hashtags aren’t predefined and are at the discretion of both the businesses and the specialists,” said Nguyen. Businesses can post up to 10 hashtags: terms that highlight what they're looking for in a specialist. The system is open to advising firms and consulting companies both large and small.

Consultant and former regulator Brad Burgtorf, founder of HighCamp Compliance, has already used the service to land two jobs. “It’s another way for us to match our expertise and services,” he said. Receiving payment and scoping the terms of the engagement are streamlined via the platform, he added, noting that his two-person team depends on many sources of job referrals and doesn’t purchase traditional advertising.

At least one former chief compliance officer is skeptical of delegating compliance to third parties on an ad hoc basis, however. “I’ll use Yelp to find a guy to install my WiFi,” explained Matt Sonnen, founder and CEO of PFI Advisors and former CCO of Luminous Capital. “I’m not going to find a neurosurgeon based on Yelp reviews.” PFI Advisors assists chief operating officers, but is founded on the belief that “an in-house COO needs to be an integrated part of an RIA’s leadership team.”

“We’re in a highly regulated industry. I don’t think Starbucks can say we don’t want to pay for coffee beans anymore. It’s compliance. It’s that important. It’s a cost of doing business,” Sonnen said. “It’s an insurance policy, right? When the SEC does show up and it doesn’t go well because you really nickeled and dimed your compliance relationship and your compliance responsibilities, the chickens come home to roost.”

Sonnen noted that for smaller firms, that aren’t necessarily able to support an in-house compliance officer, there are tech or tech-human hybrid solutions that can provide ongoing compliance support.

RIA in a Box, for example, is a low-cost subscription-based service providing tech-based compliance support with on-call human support. The company’s CEO, Will Bressman, said he sees compliance on a spectrum. There’s the one- or two-member teams that still need compliance support, but are unable to afford a full-time compliance specialist, all the way to large firms that want to streamline, using technology to automate certain redundant processes or provide their in-house CCO with a “thought partner” and supervisory tools.

“We believe that the best solution combines technological capabilities and human expertise,” said Bressman. “The way we’ve built our solution is to make sure that we’re getting proper data efficiency and quality through the technology platform and then having the opportunity to consult experts when needed for particular matters that are sensitive to a firm.”

While providing the potential for firms to outsource their compliance responsibilities, Complect understands the tension between a cost-effective solution and sound practice, particularly given Nguyen’s own experience as a consultant. “I can say that it’s best practice to bring [a compliance officer] in as soon as possible,” Nguyen said, “but if a founder doesn’t have the economic resources for it or they’ve found a good compliance consultant who essentially is on top of their business such that they feel comfortable, then that’s a relationship that works.”  

“My word of caution is that that typically isn’t the case. Nine times out of ten when I speak to a business, when they hire a compliance consultant, it’s one of those, ‘Alright, check, I’ve done it,’” Nguyen added. “You wash your hands with the compliance consultant. It’s almost like an algorithm you’ve got running in the background or something.”

Ultimately, it’s up to the advisor how they want to run the business, said Nguyen. “These solo practitioners that are on our platform, these boutique consulting firms, they were still always [be] offering their services and doing the same thing. They’re just doing it on a platform like ours to be able to more easily reach businesses like yours.”

As a self-professed aggregator, Complect said it doesn’t see in-house CCOs or tech-human hybrid firms as competitors, but there is clear competition on the horizon. In October, Fidelity said it will be launching ConsultSpace, an advisor-focused consultant marketplace run by an independent firm, Catalant. The marketplace will offer far more than just regulatory specialists, giving firms access to a range of experts from marketing strategists to cybersecurity consultants.

Like Complect, ConsultSpace will allow both participating advisors and consultants to review each other and it will be an on-demand service. ConsultSpace allows consultants to bid on projects, according to its website, and it will reportedly charge only the consultants an 18 percent fee, instead of using Complect’s model of splitting the finder’s fee between participating parties. In another contrast, the ConsultSpace ratings system seems to be visible in only one direction: ratings from job posters will appear on expert profiles, but consultants will not have access to posters’ ratings, according to the site. Catalant declined to provide specific details about ConsultSpace, noting the service was in its pilot phase.

As the gig economy influences financial advice, Complect wants to be in the driver’s seat. “When all of the competitors and all of the resources are in one spot, the only way to differentiate yourself,” Nguyen explained, “is to either offer a higher level of customer service or you have a different style or culture fit.”

“What I’m hoping will eventually happen as both sides of the marketplace grow,” Nguyen added, “is that it actually elevates the level of advice that’s being given out there.”

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