Category: Compliance, Industry Trends

5 Minutes with Craig Hollis: An interview with Boston Financial’s Chief Compliance Officer


The Chief Compliance Officer of the industry’s largest third party, full-service transfer agent discusses regulatory trends and their impact on asset management firms.

We’re now nearly halfway through the new White House administration’s “First 100 Days.” What is your interpretation of the actions being taken by President Trump in the financial services industry?

Long before the inauguration of our 45th president on January 20, it was clear the new administration would be pro-business. Both President Trump’s appointments and areas of focus (attempting to delay the DOL Fiduciary Rule, rolling back Dodd-Frank —emphasis on banking rules, and reeling in FSOC, in particular their ability to designate SIFIs) during the first 50 days indicate a desire to stimulate the economy and take the handcuffs off business growth through deregulation. Another perspective comes from policy makers, like Acting SEC Chair Michael S. Piwowar, who frame deregulation as an effort to give the “forgotten investor” the opportunity to take bigger financial risks in pursuit of bigger returns.

So what does this mean for the mutual fund industry right now?

Deregulation, like regulation, is a complicated and often lengthy process. While the financial services industry needs to be aware of what’s happening on the regulatory stage, I expect that nothing is going to change overnight. I do expect a significant slowdown in new regulations for a host of reasons that I’ll elaborate on in future blogs.

Instead of watching the dust settle on the regulatory side of the industry, I suggest that the economic realities of our industry make the case for asset managers to focus their attention on strategic business planning. We’re seeing the continued expansion of low cost, passive products, like index funds, which may make the market more accessible to consumers at reduced costs, but aren’t necessarily producing significant revenue for many firms.

In fact, in 2016, actively managed mutual funds lost $360 billion, and the introduction of new actively managed funds was 50 percent lower than in 2015. At the same time, passively managed funds took in $500 billion and ETFs took in even more. These factors are creating significant downward pressure for asset managers to rationalize products and services —in the end most likely leaving many asset managers with a reduced number of products with lower margins.

Through this process of rationalization and reinvention, asset managers are realizing they need to get back to basics by returning to their core mission and creating strong value-add messaging regarding what they do best and how they do it.

We’re also likely to see belt tightening among asset management firms as they strive to make their mutual fund business profitable. This will likely contribute to a continued increase in both industry consolidation and operational outsourcing.

Given these conditions, what are the challenges for you and your team?

It’s business as usual for us.

The DOL Fiduciary Rule is high on our list of priorities, with the April 10 implementation just more than a month away. In collaboration with DST, we’ve completed our due diligence and made all of the required adjustments to policies, procedures, and infrastructure, particularly in regards to the client communication component.

While Boston Financial has never given investment advice to our clients’ shareholders, we’ve enhanced our training and scripting to help ensure our compliance with this component of the Rule is clear as a bell. Asset managers and broker-dealers are well into their own preparations. We’re helping our clients lay the groundwork for the implementation of new share class and fee structures.

Business as usual also means continuous improvement. While the comprehensiveness, quality, and scalability of our suite of compliance solutions put us at the top of the industry, this isn’t enough to meet the set challenges facing asset management firms.

So, innovation is the name of the game for both me and my team. We’re working to develop new products and services that help our clients stay ahead and efficiently and effectively manage their risk and compliance programs.

For example, we’re active on the ICI Blue Sky Committee on making improvements to the standard dealer file so these omnibus sales feeds can meet firms’ need for data transparency. We’re also pilot testing new technologies that use expanded watch list data and behavioral analytics to deliver comprehensive fraud monitoring. These technologies also expand our capacity to create holistic risk portfolios of high-risk individuals and entities that may be interfacing with our client firms.

I know you have a lot on your plate, so I’ll let you get back to work. Thank you for your time Craig.

Any time Gretchen.

Gretchen Kinder

Gretchen Kinder

Gretchen Kinder works for Boston Financial's Sales Support and Corporate Marketing team where she works on sales support and strategy documents. Gretchen joined Boston Financial in 2014 after nearly two decades of professional experience in Boston’s nonprofit and municipal sectors. A Jane-of-all-trades, Gretchen earned her MSW/MPH from Boston University in 1997 and has held positions as a community organizer, program manager, fundraiser, event planner, strategic planning consultant, adult educator, philanthropic community manager, public information officer and grant writer/manager. She has worked in the fields of chronic disease management, community service learning, health professions education, philanthropic planning and wealth management, urban planning, public and community health, PK-12 public education, early literacy, mental health and dental insurance.


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