Category: Compliance, Creating Future Value, Industry Trends, Smart Sourcing

Now That It’s Done… Building Strong Relationships with Your Compliance Vendor


This blog post is the third in a three-part series about outsourcing compliance operations in today’s complicated financial services environment. This post was adapted from a discussion presented at DST’s 2017 ADVANCE conference.

Nearly every time I talk with an asset manager about outsourcing their compliance operations, I hear some variation of this, “But I’ve heard the conversion can be difficult (or lengthy, or painful, or aggravating.”) For some firms, their perceived fear of the on-boarding process can be so great that it prevents them from even considering an outsourcing relationship.

From my perspective, the service transition isn’t a complicated part of the outsourcing process, but rather an important opportunity to create the foundation for a strong, well-functioning relationship between the asset manager and the vendor. It is through the service transition that you forge standards for governance, collaboration, and communication. During the transition, ideally the client firm learns the jargon used by the vendor, and has plenty of opportunity to ask questions about how the service works. Conversely, during the on-boarding, the vendor firm is ideally deepening their understanding of the culture, and strategic and operational needs of their client. With this knowledge, the vendor firm collaborates with the client to make any necessary adaptations to the service model, without compromising the efficiency that comes with the vendor’s scalability and experience.

Qualities of a Strong Vendor Relationship

If you treat the management of the service transition as the foundation for the on-going management of the vendor relationship, you want the process to offer more than simply following the standard conversion steps (e.g., assess gaps, complete workflow mapping and testing). You also want your work with the vendor firm to mirror the qualities you seek in a long-term, strategic relationship, such as:

  • Engagement of the right people at the right times, ranging from technical and operational experts to the key contact people on both sides of the relationship who will be accountable for operations and oversight during the service transition and long after.
  • Clearly defined roles and timeline that help you know what work is expected of you when, and conversely, what you can expect from your vendor.
  • Clearly defined quality expectations that are measurable, realistic, and achievable.
  • Governance structures that give you and your firm confidence that timelines, milestones, and standards for quality will be achieved. These typically include communication and escalation protocols, as well as documented change control structures.
  • Resources to help you manage oversight like documented policies and procedures, flexible and comprehensive reporting, and dedicated and accessible resources for business continuity planning, data security, and risk management.

Your compliance program is a core part of your overall operation, so you should want a vendor who understands your business goals and helps you stay current on industry issues. When I ask clients what this looks like to them, they say they want a vendor who proactively offers analysis and consultation on industry trends, opportunities to talk with their peers about their best practices and challenging questions, and resources to reasonably help them achieve their oversight and audit goals.

The Oversight Process

I believe the purpose of the operational oversight process is to demonstrate the strength of the vendor in helping the investment company manage risk as it pertains to its delegated responsibilities. Ideally this process is a continuous one, collaboratively undertaken by your firm and your compliance operations partner. In my experience, continuous oversight often includes:

  • Data reports delivered to the client on a mutually agreed upon schedule
  • Face-to-face meetings, at least annually, to help ensure operational processes are aligned with the firm’s strategic needs and expectations
  • Proactive opportunities to discuss the implications of relevant regulatory news and information delivered through email and our secure, online client portal
  • Collaboration on tasks requiring client authorization

At Boston Financial, these regular activities are complemented by the more than 120 client due diligence questionnaires and site visits we execute across our operational group each year, and the 100+ presentations both I and my colleagues in cybersecurity and risk management deliver to client fund boards. Finally, our annual CCO Forum, which serves as a global CCO due diligence meeting, typically engages nearly 200 participants representing 85% of our client firms.

Making the decision to outsource all or a portion of your compliance functions is a serious and strategic process. But it doesn’t have to be difficult. Throughout this series, I’ve shared insights on the process of (a) deciding whether to outsource compliance functions (or not), (b) selecting an outsourcing vendor, and, finally, (c) building strong relationships.

And while there are trends I can point to, each firm’s decision to outsource is unique to their culture, business strategy, and leadership. One of the strengths of our business is our willingness to help both current and potential clients talk through the pros and cons of outsourcing, so they can determine if this is the right time for their firm to engage a vendor in helping with functions like blue sky, trade monitoring, management of unclaimed property, and tax administration. Please reach out to me using the contact link below if you would like to set up a meeting to begin to explore together.

Craig Hollis

Craig Hollis

Craig joined Boston Financial in July of 2004. Craig has 32 years of mutual fund transfer agency experience in which time he has been responsible for managing numerous operational and support groups including: financial control, transfer agent and blue sky compliance, tax reporting and withholding, intermediary compensation, transaction processing and offshore distribution and servicing. Craig is currently responsible for the regulatory oversight of Boston Financial’s Transfer Agent activities as well as all operational aspects of Boston Financial’s compliance program including a 22c-2 full service solution and Blue Sky administrative services. Additionally, Craig represents Boston Financial in periodic Regulatory Compliance Advisory Group Sessions (RCAG) and is active in the industry, serving on the ICI Transfer Agent Advisory Committee, ICI Abandoned Property Task Force, ICI State Related Issues Working Group, ICI subcommittee on Money Market Reform (Institutional vs. Retail), NICSA Compliance Risk Committee, the Securities Transfer Association and has been a speaker at numerous industry events.


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