It started with fear unlike the mar- kets had ever experienced — a pan- demic threatening life as we knewit. Advisory firms hunkered down, lefttheir offices and opted to work remotely.But they proved resilient, continuing toprovide seamless services to a stressedclientele, albeit with the assistance ofsome amazing technology.
We saw a massive correction in thestock market only to be followed by historic gains. What first looked like financial Armageddon turned to substantialgains for both investors and advisoryfirms alike. Although the pandemic isnot over, with firms gradually returningto the office, it appears that the worst isbehind us.
I have been a road warrior for morethan 30 years, traveling the country tomeet with and prepare advisory firmsfor regulatory examinations. Travelstopped, and even when it started toresume, firms were (and some rightfullyremain) hesitant. I took my first flightthe last week of April to visit clients inTexas. I now have booked flights foralmost every remaining week in 2021.
However, prior to this week, I sat inmy recliner chair conducting those samemeetings, albeit differently, with theassistance of technology. My dry cleaning bill became virtually non-existent.I spent more time with my wife than Ihave during the past 30 years; for that,I was and am grateful. Although a travelveteran, it was hard for me to leave onMonday for the airport (I don’t know ifmy wife shared my emotions).
Through it all, regulators did not miss
a beat. They continued examining advi-
sory firms, opting for remote examina-
tions with the assistance of technology.
What have we learned personally? We
can adapt. Good employees can excel in
the office or remotely; and despite the
tragedy of the pandemic, life goes on.
And what have we learned professionally?
• With the advent of some amazingtechnology, advisors, their lawyersand consultants and their regulators, can discharge their obligationsfrom home or the office;
• Regulators don’t need to physically
visit offices to conduct thorough
examinations. To the contrary, per-
haps their ability to more effectively
and efficiently do so is enhanced by
the virtual examination format:
a. Request and exchange documen-
b. Conduct interviews using one of
c. Maintain electronic records of
all exchanged information/docu-
d. Conduct exit meetings; and,
e. Send/respond to an exam find-
ings letter (perhaps, for those
well prepared, no responses will
What might the future hold for regulatory examinations? They becomemore streamlined. There also may bethe option for virtual vs. on-site exams,especially once it’s realized that on-siteexams only increase regulatory budgets,time away from family and enhanceexam anxiety.
In addition is the realization thatmany of the standard routine examination issues have run their course, withregulators opting to direct their effortsto examine and confirm the criticalissues (i.e., is the money where it is supposed to be, are firms proving servicesreasonably consistent with their FormsADV, and are they maintaining clientinformation in a secure and confidential manner). This can be accomplishedmore effectively and efficiently on aremote basis.
But, alas, this changing world — andways to do business and regulate fromafar — brings up other questions. Whatabout human interaction and the dailymix of being within an office — orwill offices become smaller, perhapsshrinking advisory firm overhead? Willwe permit employees to continue towork remotely? And when a valuedemployee needs to relocate, mightwe opt for retaining that employeeremotely vs. having to find, and train,a replacement?
The world has certainly changed.It will be interesting to revisit theseissues one year from now.
Thomas D. Giachetti is chairman of theInvestment Management and SecuritiesPractice Group of Stark & Stark. He can bereached at email@example.com.
THE COMPLIANCE COACHBy Thomas D. Giachetti
How Will the Pandemic Change Regulation?Actions taken over the past year may mean big future shifts, including areduction in compliance costs.