Part Three: Client-Level Suitability

As the summer days wind down, we’ve reached the final leg of our compliance series. In this last installment, we’ll look into another essential consideration for modernizing and scaling your compliance program: Client-Level Suitability. 

Incase you missed it:

Part 1: Cloud-based Platforms

Part 2: Dealer and Advisor Alignment

Part 3: Client-Level Suitability

Think of client-level suitability as taking a panoramic photo of a beach, capturing the entire landscape in one frame, the same way client-level suitability provides a holistic view of a client’s investments. Traditionally, account-level suitability is like capturing each element separately, taking close-up photos of the sand or ocean. While these details are important, they don’t paint the full picture. 

Wealth management firms are increasingly challenging the conventional practice of account-level suitability and are embracing a portfolio/client-level approach to investment management and supervision. Thanks to advances in technology, firms can now align their supervision with how advisors and investors think about goals and objectives. This transition offers compelling benefits associated with evaluating suitability at the client level:

  1. Risk Management: Client-level reporting provides a more holistic view of suitability by assessing risk across the entire portfolio, rather than relying on a transaction-by-account approach. 
  2. Increased Efficiency: An aggregated approach may also streamline the investment decision and review process, saving time for advisors and dealers by evaluating risk at the portfolio level. It’s essential to note that this doesn’t alleviate an advisor’s or firm’s obligation to ensure all investment actions are suitable. However, it may provide flexibility to make recommendations that align with the overall portfolio, rather than being confined to the account level. 
  3. Better Investor Outcomes: Clients can gain a deeper understanding of how their investments align with their goals with a holistic approach. Client-level suitability can provide clarity and alignment for their desired outcomes.
Benefits of transitioning to client-level suitability

At Four Eyes, we believe that client-level suitability represents a step forward for investment management. Our Intelligent Compliance Platform is designed to accommodate and remain compliant with both account-level and portfolio-level oversight and supervision, unlocking a multitude of benefits that allow our clients to see the big picture:

  1. Competitive Edge: Fee-based and discretionary advisory models are surging ahead of transactional models for a good reason.  Having portfolio-level capabilities not only helps dealers retain top advisor talent but also provides a competitive advantage in advisor retention and recruitment. 
  2. Operational Flexibility: Our solution supports multiple lines of business within a single platform. This versatility offers dealers the option to streamline their operations through a single software solution tailored to the compliance needs of each line of business. 
  3. Cost-Efficient Supervision: Transitioning to an automated system for exception-based alerts eliminates the mundane tasks, allowing compliance efforts on the bigger picture – portfolio risk – rather than individual transactions.  

As the sun sets on our summer series, stay tuned for our upcoming summary. We’ll consolidate all the valuable considerations from this three-part series, providing a guide to enhance your compliance program.

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