Author: Compliance Solutions Strategies

In an April 2003 speech by Lori Richards, the then-director of the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations mentioned one area where she believed some less-than-meticulous care has been given: the supervision of service providers and in particular, sub-advisers.

When it comes to managing cybersecurity risk, investment advisers are in a tough position. As the frequency and variety of cybersecurity risks mount, IT budgets and staffing do not always follow suit. Compliance and IT professionals are often asked to do more with less, which can seem overwhelming given an ever-expanding list of regulatory and business requirements as well as increased scrutiny of firms’ cybersecurity controls by third parties.

If your firm isn’t already using an outside consultant, you may want to ask yourself “why not?” Oftentimes at hedge funds, compliance officers struggle to successfully fulfill the requirements of the job without an essential tool in their toolbox: the outside compliance consultant. Why? The primary reason is simple: resources.

As the investment management industry becomes more consumer-focused, individual investors are pressing advisers for more innovative products and a personalized client experience. Further, the growth of passive strategies has created fee pressure across the spectrum, leading to contracting margins.1 Outsourcing certain critical functions can be an effective tool for advisers looking to focus on more strategic goals.