EP 76 | The Intersection of Tech and Compliance with Cory Roberson

David DeCelle  10:52

Awesome. A few things in response to that. One, definitely envious of your travel experience. And hopefully, the world opens back up more so soon, and you can get back on that train. But I'm sure, I mean, anytime I travel, I feel like an idea pops in my head or I meet someone cool that helps formulate an idea or make a good connection. So I'm sure a lot of where you're at today, you'd probably give some of that credit to the travel experience that you've had and the people you meet and the motivation that you've gathered from those.

 

Cory Roberson  11:25

Exactly. And I'm home now. Like everyone, I've been home for the last, because of this pandemic, for the last year and change. I mean, me and my wife, my wife and I have taken road trips, and we have a three month old. So I’m home.

 

David DeCelle 

Oh, congratulations!

 

Cory Roberson 

There was definitely a season; of course, we love to travel as well. And that goes along with, let's say if you see an opportunity, let's say if you are a small independent investment advisor, or you're larger, you work for a larger firm as well. There is room in this day and age to add something to that traditional model that you have. This day, you don't have to be just fee only, or the hybrid selling insurance with selling commission; there's other things that you could do out here. Let's say if you wanted to work in Fintech and the investment advisory space. Robinhoods — there's all these Fintech that are adapting or robo-advisors that are adapting tech into their models as well.

 

David DeCelle  12:20

love it. It's interesting too, my business partner, Patrick Brewer, who a lot of our listeners know, that's where he came from was DFA as well. So some common ground there. And he realized the same thing, because his first iteration of the company was Brewer Consulting; his last name is Brewer. And then we rebranded it to Model FA, for the same sort of reason that you mentioned, where it's, hey, this has to be bigger than one person, not just for the fact that we want to make sure that the team feels included, but also from an enterprise level perspective. If your name’s attached to it, it may affect valuation to a degree in the long term as well. Let's get into compliance. So you kind of alluded to the fact, and I will say that in working with our clients, I feel like the thing that they experience friction with the most is compliance. And often times, they don't necessarily have or utilize tools and resources that are available to them. You alluded to something towards the tail end of your backstory about technology and compliance, and the way I interpreted that is that there is perhaps some sort of intersection point between those two to ease the pain of compliance. Because at the end of the day, most every advisor got into this business because they want to help people with their money, and they love interacting with people. So anytime they're not doing that, obviously, it's going to drain their energy. So I feel like people like you and services like yours is not just helping with compliance, but it's helping to manage their energy on an ongoing basis; they can stay doing the things they love. So help me understand, I don't know the compliance space overly well. So help me understand, where does technology and compliance intersect to make this process easier for advisors?

 

Cory Roberson  14:12

If you think about it this way, compliance, policies, and procedures, you have a bunch of tasks that you're either expected to do based on your business model, either monthly, quarterly, or annually. Let's say you have a policies and procedures manual as a point of reference. Now, the question from a compliance standpoint, are you doing what you say you're doing? And so if you are having friction points in doing what you say you're doing, then perhaps you could use an additional resource, a workflow and integration, a technology tool that can help you to make sure that you achieve this endpoint, this task, that you have actually completed it. So think about it from you’re looking at your procedures manual, you're opening it up. Okay, we need to make sure that we disclose our ADV, or we disclose our privacy policy when there is a material change, or at least once a year to our clients. Well, maybe instead of physically putting it in the mail, or checking on an Excel form or a checklist, maybe you can use a compliance resource, us or a CRM. Or maybe you can use another technology tool that automatically sends that. These days, some people still use snail mail, of course. But you can always, there's always other electronic ways to send documentation as well, or to make a portfolio review, best execution review; maybe you can use a technology tool to do some of those things. Checking to make sure that you're registered in the states that you need to register in; maybe there is a technology tool that can help you achieve that objective, a workflow. Long story short, it's connecting your policies and procedures into a workflow that can be integrated or automated, or that can be done by let's say, it's taking off work from your shoulder. Let's say you're the principal, you're the advisor, and you can give that to someone else to do. Now, with compliance, there always needs to be some kind of check, just to make sure that things are done. So you can't completely rely on the technology. Let's say if the technology is printing out an exemption report or printing out something as a proof of audit. Like, let's say the technology's automating this certain function. Well, who's checking to make sure that there's no errors or anything is happening? So generally, there needs to be somebody doing the check, even if you're using technology to complete this workflow. But technology is definitely a huge value, and we had to embrace that. From a consulting standpoint, we work with a lot of firms, and we help them. Some of the processes are manual, because sometimes you just have to take a phone call. Sometimes you have to be open to helping them with reading through a document or understanding that, and there's no technology precedent for jumping on a phone call and interpreting an issue. Now, once the issue is interpreted, then maybe you can apply a technology solution to that. And so that's what we're working on, really. Everything that we're doing, now we're building that out. We have a SaaS platform, and we're actually working on a mobile app, as well, to help them complete certain tasks. Now, everything you can't necessarily rely on technology to do everything, especially if you have a regulator, they're coming in. They want to make sure that there's someone actually reviewing some of the documentation besides just relying on the technology solution.

 

David DeCelle  17:36

Are you and your company kind of serving as like a fractional Chief Compliance Officer? Do you guys serve as the human that still needs to do certain things? Is the advisor still expected to allocate X amount of hours per month or per week themselves to see some of these things? How does that work when folks partner with you in that regard?

 

Cory Roberson  17:58

So, we are outsourced consulting solutions. We don't necessarily offer the outsource CCO component. Usually, most of our smaller independent firms, they serve as the CCO, but then they will call on us to help them with everything from registrations, filings, document reviews, and on a more extensive level, mock audits and things as well. So let's say if you an SEC registered firm, you're expected to do an annual review of your policies and procedures. If you're a state registered firm, most states will require you to have, from a books and records standpoint, all of the documentation that they request prior to an exam, and then you're expected to have this certain documentation in place. Now, some states like Washington, for example, do require what the SEC requires, is a formal annual review of your policies or procedures. So if we are requested to do an annual review or a mock audit, then we will suggest or we make certain recommendations as far as the documentation that the advisor should have in place as proof of review. So proof of review could be let's say you have a technology solution that is doing an automated check. If it's a trading review, if it's looking for doing the best execution analysis; have you actually printed out that the audit report from that technology as proof of review or proof of documentation? So in that sense, we offer, we are the extension from a consulting standpoint, and of course, the CCO is responsible for more of the internal review. And so we look at it from an external standpoint, that we are aren't in the office, or at home in some of these cases here, is that we aren't in their office space, and we don't necessarily — we don't have access to any of their internal records unless it's during a review.

 

David DeCelle  19:52

Cool. So I come from the broker dealer space and pretty much all of this stuff was taken care of for me where I was, because it was a very large company, and they had people internally to, for lack of a better way to put it, just deal with all this stuff. And I was able to run around and be an advisor. So when I left, I didn't leave and start an RIA; I left and got into consulting. I know that there's a number of folks that are listening to this podcast, and that we work with currently, who are in that broker dealer model, and they're considering going into the RIA space. Now, if that were me, I, quite frankly, wouldn't even know where to start with compliance or what questions to ask about compliance; because again, it was just taking care of where I was. So for people who kind of fit that mold, what are some questions that they should be asking themselves? What are some things that they need to be taken into consideration as it relates to compliance? What forms need to be filed? What things do they need to be aware of? I guess, help some of those folks understand that place.

 

Cory Roberson  21:05

The first thing I talk about in my book is, well, the title is Don't Play Around, Write It Down. So write the vision, write the goal, write the business name. Write it down, make sure that you have it in place, because the whole goal of starting a business, starting an RIA, is you want to be inspired, you want to be encouraged. There's a lot of challenges; compliance is one of them, of course. You want to be encouraged; you want to start with a name. Write the name down, and then, from a corporate filing standpoint, is do you want to start a sole proprietorship? Do you want to start an LLC? Do you want to start a C Corp, an S Corp? What type of business structure do you want to have in place? Do you want to have a business partner? Or do you want to just start solo? So from just the general framework, what type of services do you want to offer? What is common for an independent RIA? Is it fee only? That's a popular model in this day and age. How are you going to differentiate yourself from other people? What's your niche? So all those different types of questions, just to get your general framework in mind. What type of services am I going to offer? Who am I going to offer them to? Do I want to offer them to younger people? Well, or do I want to offer them to people who we deem that are appropriate? Let's say if it's someone who is just starting off in their career, or maybe it's someone who is more advanced, maybe they have more assets under management. So getting the general framework of what type of business do I want to have. And then from a compliance standpoint, once you have those things in place is, just from a general registration standpoint, you want to file your ADV Part 1; you want to file your ADV Parts 2A, 2B. You want to also if you're SEC registered, if let's say you're starting off larger, or you want to register in fifteen or more states, is that there's an additional form that's required, which is called the Form CRS, or the client relationship summary. So those are general things that you need to have in place from a registration standpoint. And then policies and procedures; there's general policies, procedures that apply to many advisors, and what you can do once you have your business established is you can customize some of that. And if you don't know how to do that, then at that point, you can talk to us, you can talk compliance; from a consulting standpoint, we help you interpret what policies or procedures are relevant based on your business model. So every business model, there is a uniqueness to it, and then there's also a uniformity. The uniformity is in the ADV Part 2A. There's general requirements on how those things are supposed to be filled out, and that doesn't deviate as much. But what you include in those things is where you can add a little bit of customization. Let's say you want to have a financial literacy program for kids as another business activity. Well, maybe you can put that into your model as well. Well, there are certain places in the ADV Part 1 and Part 2, where you include other business activities, and Part 2B as well. So you want to make sure that you have your registration documents in place. You want to make sure that you tailor your policies, procedures to what the firm is actually doing, as opposed to just relying on just boilerplate procedures. Yes, there's a uniformity and certain procedures and requirements based on the Advisors Act or the Uniform Securities Act. But then you can also create or customize those things based on what your firm is actually doing or would like to do in the near future.

 

David DeCelle  24:40

And that's all stuff that, in this hypothetical scenario, that's all stuff that you help with so we're not having to do this research on our own; we aren’t trying to figure out how to file these things on our own. That's all stuff that someone like you would be able to kind of like hold our hands through that process. Because I even felt myself feeling overwhelmed as you were going through that, because again, compliance is not my thing. So I'm assuming that that's kind of the core business model?

 

Cory Roberson  25:07

Exactly, and we've done it a million times. So this is something that we know the forum's, we've been through them, we've reviewed them a million times. And what we like is we like to add or encourage creativity. So, let's say you have a traditional model in there, but let's say you want to work on an additional business line, or you want to have something creative or something unique into that; encourage that. You don't necessarily have to have exactly what everyone else is doing. There is room for podcasts, for example. There's room what Model FA is doing, what Patrick was doing when he launched this, and then he also launched an RIA as well, and I think he's with another one. So there is room for creativity; there's room for adding a different type of business into your model. And so what we do is we work with the traditional stuff, of course, and then we will also encourage or plug in you with any of our resources that we have. Let's say if it's Fintech, we have resource in that space, to where you don't necessarily have to just follow what everyone else is doing. But you have to disclose it uniformly, of course.

 

Patrick Brewer  26:14

Hey, Model FAs. I know you're enjoying this conversation, but I wanted to take a quick break to talk to you about the Model FA Accelerator. This is a unique collaboration between us and you, where we help you build a financial advising practice that you can be proud of. We focus on the foundational concepts around how to pick a niche or a specialization, how to price your services, how to construct an offer that people are going to buy, and then how to market it and sell it in a way that'll get people to sign on the dotted line and become clients of your firm, all while giving you the information to scale and set up workflows and operational processes that will allow you to reclaim your time and build a practice that doesn't run you. So if you'd like to hear more about that, go to www.ModelFA.com/accelerator or www.ModelFA.com. Hover over Work With Us and click on Accelerator. Hope to see you in the program.

 

David DeCelle  27:04

So I have a question I wasn't planning on asking, but this is more so me being curious. I feel like a lot, if not most of advisors out there, they have entrepreneurial blood in them, and that's why they open up their own business. And for some types of entrepreneurs, they can keep their head down and keep running and charging and doing the same thing and build their practice, and that scratches their entrepreneurial itch. There's other folks who are building companies, that are building financial planning practices, I should say that, to a degree can run without them, if they did a great job building out their ops team and brought on additional advisors; and they may want to go and do something else while maintaining their cash cow of their practice. And you had just mentioned that, whether it's Fintech or whatever it may be; out of curiosity, what's the coolest type of company that an advisor has started, in your opinion, off of their financial planning practice? Is it in Fintech? Is it in a different industry? What's kind of a cool or unique business idea that you've come across?

 

Cory Roberson  28:14

I've seen advisor matchmaking, most recently, and then I've seen besides the app, financial literacy app.

 

David DeCelle 

Is that like educational tool?

 

Cory Roberson 

Yeah, a financial planning tool, I've seen that. Not necessarily any of the Robinhood's I've seen with the advisors I work with. I think it takes quite a bit of funding to launch some of those types of things. What else have I seen? Financial literacy, financial planning tools. I've seen private funds, actually; some of them have launched real estate private funds. Some of them have launched Bitcoin or crypto private fund, I've seen that too. Those are just a few examples of besides just the traditional things, but as you alluded to, there is money in the traditional side; there is opportunity there. So if you have the traditional model, assets under management or the financial planning, and you don't want to do anything else, that's fine, too. That's perfectly fine. Or if, let's say you have an entrepreneurial itch, and you want to explore maybe some new technology; AI. I have a client who's actually launching an AI platform now, and so it's exciting. I have another that thought about, I don't know how far along they've gotten, but they were looking into crowdfunding as well.

 

David DeCelle  29:27

It's cool. We had a guest on our show a while back, Ron Bullis with Lifeworks Advisors. And they're not only building their financial planning business, but it's also a home for advisors that may want to join them as well, and they developed an app. So when you think about, like the onboarding experience of a client currently, there's typically a lot of paperwork and DocuSign, and it can be kind of a strenuous process. Whereas, if you look to a Betterment or a Robinhood, you can create a new account in three minutes. So they actually created an app that allows advisors to plug into their business and utilize this so that the onboarding experience is Betterment or Robinhood like. So it's interesting to hear from you and a lot of those examples, and then that example that I just shared, that these advisors are noticing problems or opportunities just as they're going about their business. And based on being wired as an entrepreneur, they're going out and actually solving those problems, which I just think is pretty cool. Because it's tough for folks without any experience in a particular industry to come in and know what's working or what's not to develop something. So it's cool that these people who come across the issues are actually doing something to solve it; it's pretty cool to see.

 

Cory Roberson  30:51

Yeah, and that's awesome. And so from a consulting standpoint, is that we are in the field. So we are still like actually talking to clients and talking to people and understanding where the pain points or where the challenges are. So as opposed to just building technology or building out things for the fun of it, which is not very fun, it's very expensive. And especially if you don't have any customers, then that's not good. So you want to make sure that you target your solution to what the customers actually need. So you actually have to go out and talk to people; you have to go out and what they call validating, market validation; you have to go out and talk to people and understand where the pain points are. So one of the thing is, is that we don't try to be all things to all people. We actually have an API we're developing as well with our staff, an app; basically an integration. So we're looking for integration partners. Let's say if one comes to our knowledge, and we understand what they're doing, and it actually fits within our model, we're open to a conversation for that. Just because we understand that there's a lot of great solutions out there, and we haven't created them all. We’re focused on our compliance and disclosure processes, but then still we're definitely open to collaborations as well.

 

David DeCelle  32:08

Love it. So before we get into your favorite book, which as I mentioned before we started recording is timely for me personally, is there a point, whether it be AUM or revenue, is there a point where a financial planning business would outgrow a company like yours? Meaning, just take it all internally? Or is there, is it like once they hit 100 million or 500 million or a billion? Is there a particular number to where it makes sense to just do everything in house? Or is there an opportunity for advisors of any size, big or small, to utilize the outside compliance consultants?

 

Cory Roberson  32:50

So outside external versus internal. If you have the budget, let's say what does — and this is the analysis you have to do based on where you live in, or if you want a virtual person — is what is the cost of a compliance officer? What is the cost of a CCO from an hourly or annual salary standpoint? And do you have enough work? Let's say you've grown; your assets have grown to let's say, 100, 200 million, but you have a super scalable model. Let's say it's all AUM or it's all something to where you're plugging in algorithms. It's a robo model, and you don't necessarily have a lot of additional requirements outside of when you started your RIA and working, and you started working with a consultant. So at a certain standpoint, you have to understand what are the costs of having a more of a full time or a part time internal person versus continuing using a consultant. So let's say if you are 100, 200, 300 million, and you have the salary for or you have the money for an internal compliance officer, or a CCO — let's say, if you want to hand off compliance completely to a CCO type of person. Well, there are certain functions and certain responsibilities that the CCO will be required to do in house anyway. And who's to say that you can't continue working with a consultant for some of those things that are, let's say, a time burden for the Chief Compliance Officer. Now, there are certain things that the Chief Compliance Officer, let's say if they want to do everything; or let's say if the Chief Compliance Officer is asked to do other responsibilities or tasks within the firm. Well, do you want to give that person the role, let's say operations based responsibilities and compliance? Do they have the time to efficiently complete all those tasks? If they do, great, you can have somebody internally, or you can also have somebody externally like a consultant just in case there are issues that you need a third eye, that you need an outside party to review or have a backup. Let's say if you're relying on the CCO, the compliance officer, internally to do everything, and they take a vacation or they get sick. Something happens, life events happen and that CCO is out for three months, is out for an extended period of time, and then you've relied on that person to do everything, and there's no backups internally. Well, that would be an opportunity to have a consultant or third party as the backup. So there's just different scenarios. You want to look at salary, do you have the money in place? You want to look at does it make sense to have a backup externally? Or should we give the internal person to do it and have an internal backup?

 

David DeCelle  35:29

So it seems like it certainly depends. There's a business case for any of those scenarios. But I really like the idea of keeping that compliance officer doing those higher level activities while outsourcing as much of the menial stuff as you can so that they're not bogged down with the time consuming things that can be offloaded. And I didn't think about perhaps they have an additional role within the firm, or maybe they have great connections in the community, and they can kind of be a rainmaker for some of the advisors in the firm themselves. So I hadn't thought about kind of repurposing that person or diversifying their role. But depending on their strengths, I think that if they can generate more revenue through those activities, and some of the menial stuff that can be outsourced, it's a no brainer. So I like that idea.

 

Cory Roberson  36:20

Yeah, and there's firms that do that. So there's firms that offer outsourced CCO completely. And one of the things is, we don't try to be all things to all people. So there is that resource there too.

 

David DeCelle  36:29

Cool. Awesome. So for those of you who have been listening to these episodes for a while, you kind of know the deal at this point. And for those who this may be the first episode that you're listening to, I ask all the guests that we have on the show what their favorite book is, because I want to promote reading beyond the scope of just what our industry talks about. Because I think that, personally and professionally, there's a lot of other good nuggets out there and other books. So I know in the intake form, Cory, and the reason why I said this as timely is I remember growing up, and I went to church every single Sunday when I was a kid all the way until I went to college, and I was an altar server, I played the guitar at church for 10 years. Then when I went to college up through now, just kind of fell out of love with that. So we don't need to get too religious on the show today, per se, but I say it's timely because you said your favorite book is the Bible, and you've done a lot of mission trips. So I'm curious to know, what is the impact that the Bible has had on you both personally and professionally? Because I think that those lines can be pretty blurry, or can blend together, I should say, and this has been something that I've been trying to rediscover myself. So I'm curious to see the impact that it's had on you.

 

Cory Roberson  38:02

So there is a balance that maybe the pandemic brought it out in some people in certain ways, or makes you realize, it certainly did for me, is that there is a lot of things going on outside of our control. And so from a business standpoint, we're constantly inundated with self-help books, business books, financial books, make a lot of money doing all these different things like that. And yet there is something beyond, I believe, there is something beyond just this life. There is God, I believe that, and so I believe that even though you build success, you build all these different things, let's say you're able to do that. It's going from self-perspective to God perspective. And so understanding that, the Bible is my favorite book is like, where does He place? Where does He fit in with all that? So beyond just thinking of everything in terms of self-help, thinking of everything in terms of I am the, I can create, or I can manifest everything. It's me understanding, from a faith standpoint, is understanding that God feels that He has allowed me, by His grace, He has given me the ability to do so many different things, not in and of myself only, but in His grace or His glory, His will. And so making that connection to working to entrepreneurship to the Bible, making that connection to the wisdom that is in the Bible and understanding some of the stories, the parables that Jesus was talking about a New Testament and looking at the Old Testament, and understanding some of the challenges that those people, maybe it was fear, maybe it was trepidation, maybe it was worry, maybe it was doubt. Philippians 4:6, do not worry or be anxious for anything but present your requests to God. So understanding the power and importance of prayer like that is outside of just, you can work seven days a week and I've done that. You can do everything that you can. You can read a bunch of self-help books; I've done that. You can go to every seminar, you can go to every workshop, you can do everything that you can do from a human standpoint, reading books, getting education, learning about financial literacy, learning about the knowledge. But at a certain point, what I realized and what some people might realize is that there might be something missing there; a vision and purpose beyond just the goal of launching a business to make money and be successful. What is more than that? What else is outside of that? And so for me, it's faith. It’s understanding that God has a vision, has a purpose for my life and understanding that that is a balance that if I get outside of just acting for myself, that he can help me with that.

 

David DeCelle  40:22

Very cool. I feel like, from what you just shared, it helps kind of give you the power to keep on going when times are tough, because it gives you perspective along the way of how other people live, what's going on through other people's lives, and it just kind of put you in a different mindset. And for people that I know that feel really connected, it's almost like their fear or their worry goes away, because they trust that there's a larger purpose for them. And whatever happens is part of the journey to get there to a degree, and if you're operating without fear, you're a force to be reckoned with.

 

Cory Roberson  40:58

Yeah, and use this example. Let's say if something happens in life; things happen, bad things happen. What are we going to tell people? Just launch a business, just read another self-help book, just make a lot of money, and that's going to solve everything; or just get education just for the sake of getting education. It's like, oftentimes, we are going to, sometimes we're going to pray for people, we're going to get outside of just the normal day to day things that we do. And so it's just making that connection, and that's how I use the Bible. Not using it; it's like God working in me, and understanding what lessons are learned in the Bible.

 

David DeCelle  41:33

Love it. I appreciate you sharing that with me. For those of you who are tuning in, and maybe considering taking a look at what Cory and his team has to offer, Cory, where can these folks find you? What's the best medium to get a hold of you?

 

Cory Roberson  41:49

You can reach out to me and my team on FINcompliance.io, which is F-I-N compliance, one word, dot IO. You can just go onto the website, reach out to us, fill out our contact form; we have a chat feature as well. Then I will respond back to you, and then we can get connected.

 

David DeCelle  42:05

Awesome. And all of Cory’s social links will be in the show notes as well.

 

Cory Roberson 

I’m on LinkedIn a lot.

 

David DeCelle 

I know you're very active on the various platforms. I love that approach and that ability to talk directly to someone and get to know them on a personal level. So hopefully, you all take the opportunity to do so with Cory. He, like I said at the beginning, not just great at adding value, but great at starting and facilitating conversations online as well. So I'm sure that you'll get a nugget or two of what Cory is posting. And one ask that I have for us on this show is we'd love the opportunity to invite you to review the podcast on iTunes. That will really help with moving the show along, getting it out to more people who would appreciate you doing so. And if you do that, just go ahead and take a screenshot of that submission and shoot me a text to 978-228-2338. Again, that's 978-228-2338. You'll get an automated response right away for you to enter in your first and last name. Once you submit that, I'll get notified, and then beyond that, it's actually me talking to you; it's not an automated service. It's just an automated subscription so that it gets added to my contacts. And as a thank you for doing so, what I'll do is I will gift you a couple of the videos within the Accelerator course that we have, which is all about referral marketing from one of our managing partners, Dan Allison, that has been speaking on this topic for 20 years. You probably know him from your time at DFA; he was doing a lot of speaking with DFA as well. So as a thank you, we'll be happy to give that to you. So just shoot me a text and include that screenshot and just reference the episode with Cory, and I'll go ahead and send that to you. Also, if there's anyone listening that thinks that they know someone or maybe you're someone that would be a good guest for the show, we'd invite you to reach out to us as well. You can either text that same number or email me directly at [email protected], and we'd love to hear from you. So with that, Cory, I know that we connected a while back and were finally now getting around to recording the episode, so I appreciate the connection. I appreciate the conversation. I got a lot out of it; makes compliance not as scary to me, from the outside looking in, and hopefully the folks who are listening in feel the same way, but appreciate you spending some time.

 

Cory Roberson  44:32

Yeah, I appreciate it. Thank you again for just inviting me to the show. Had a great time.

 

David DeCelle 

Of course, take care.

 

Cory Roberson 

Alright, take care. Have a good day.