Hearsay Systems 2021 Finserv Compliance Benchmark Report Reveals Insights on Digital Communications Practices and Priorities

Hearsay Systems, the trusted leader in compliant digital communications that deliver an authentic, human-client experience for the financial services industry, today announced the findings from its 2021 Finserv Compliance Benchmark Report on how compliance teams are dealing with the challenges presented by the increasing volume and complexity of digital communications. Based on survey findings, financial services firms are still wary of social media's reputational impact, the enablement of compliant texting for advisors, and the adoption of new technologies that assist supervision processes.

“The quantity and complexity of digital communications for financial services have exploded in our hybrid and remote work environments, and compliance teams often lack the resources—both human and machine—to effectively manage this increase in volume,” said Iain Duke-Richardet, VP of Compliance Strategy at Hearsay Systems. “With compliance team sizes expected to remain steady, technology must be leveraged to carry the weight.”

Key Findings:

• Social media is no longer viewed as a significant compliance risk, but it is a reputational one. The survey showed that the majority of firms feel social media drives reputational risk. While more than 50% allow Facebook and Twitter, and ~90% permit LinkedIn, it’s clear that capturing, monitoring, and archiving this data is less of a concern than the intrinsic risk of being able to adequately supervise the content itself. Two-thirds of firms surveyed allow advisors to generate unique content for social media, and 90% of firms surveyed pre-approve some or all of this original content, even though regulators have lessened the obligation for such pre-review.
• Texting is considered the greatest compliance risk. Of survey respondents, 63% permit texting for business purposes. This indicates that these organizations likely have a compliant texting solution in place—and for those organizations, their solution meets their regulatory requirements with respect to capturing and monitoring that activity. However, for those firms that do not allow texting, responses indicate that it is because they view texting as a significant regulatory risk. Recent enforcement actions have shown that when firms do not provide a channel for their employees to text compliantly or simply prohibit texting, there is a strong onus placed on those firms to ensure the policy is being adhered to. The measures these firms rely on to defend their policy are costly and complicated.
• Compliance teams are stretched too thin to fully monitor content on their own, yet few have adopted sufficient technology solutions to ease this burden. An over-reliance on manual functions means compliance teams are overwhelmed by low- and moderate-risk issues. Technology and automation could be considered to free up team members to focus on the riskiest issues that matter most to their business. Currently, only 25% of survey respondents are implementing AI-enhanced reviews to improve efficiency. A major hurdle to adoption is the fact that many AI-based, automated solutions were not designed with financial services in mind. As such, respondents have adopted more of a “wait-and-see approach” to ensure that products, services, and/or applications hold up to regulatory scrutiny. On top of this, teams have not trusted AI-based solutions to fully identify issues and feel ill-equipped to supervise, explain, and test that these tools are functioning as designed.
• Social channels that offer “show not tell” functionality are increasingly in demand due to their ability to cut through the noise. The most common social channels leveraged by financial professionals are LinkedIn, Facebook and Twitter, while the channels firms are most interested in adding are Instagram and YouTube—not surprisingly, channels that allow for “show not tell.” Particularly given the lack of face-to-face interaction over the past 18 months, video has emerged as an important tactic used by financial representatives to showcase who they are and what it’s like to work with them. The challenges in adding such new channels focus first and foremost on concerns over regulatory acceptance of supervisory technology and methods. This goes back to the need for, and challenge with, adopting and overseeing new technologies, including artificial intelligence, for supervision support.
• Sharing endorsements and testimonials via social media is expected to rise in the next year. Wealth and Asset Management offer fewer opportunities for advisors to give and receive endorsements and testimonials, while Life and P&C Insurance are somewhat more permissive in this regard. When it comes to endorsements (e.g., LinkedIn skills, Facebook likes) and testimonials (e.g., reviews, recommendations), there is much less consensus on whether to allow this behavior. To seize the opportunity provided by peer-to-peer testimonials, (and in part driven by the Marketing Rule coming into effect in November 2022), 29% of Wealth and Asset Management respondents said they plan to start allowing advisors to accept testimonials over social media within the next 12 months.

“Compliance teams need to face their real or perceived lack of technical skills and open the proverbial black box in order to fully leverage digital communications,” added Duke-Richardet. “To take advantage of automation, compliance teams must learn to explain how they supervise and test these tools. A key goal for 2022 planning should be to develop these technical skills within the team and learn best practices in documenting, explaining, supervising and testing automation tools.”

Hearsay’s 2021 Finserv Compliance Benchmark Report gathered feedback from 50 North American compliance leaders, using an online survey tool between August and September, 2021.

• To read the full report, please go to https://info.hearsaysystems.com/2021_Q4_10_Compliance-Survey-Download-Report.html
• To register for a webinar covering the Survey’s key findings on Thursday, 11.18, at 10 am PT | 1 pm ET, please visit: https://info.hearsaysystems.com/2021_Q4_10_ComplianceSurveyWebinar_LP-Register.

To learn more about how to build the most compliant and efficient digital communications programs, created specifically around the needs of financial services organizations, please visit www.hearsaysystems.com.

About Hearsay

Hearsay Systems is reinventing the human-client experience in financial services. The Hearsay Client Engagement Platform empowers over 200,000 advisors and agents to authentically and intelligently grow business relationships by proactively guiding and capturing the last mile of digital communications. The world’s leading financial firms—including New York Life, Morgan Stanley, Charles Schwab, and Ameriprise—rely on Hearsay’s SaaS platform to scale their reach, optimize sales engagements, and deliver exceptional client service in a consistent and compliant manner. Hearsay is headquartered in San Francisco, with locations throughout North America, Europe and Asia.

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