EP08 - Serve, protect, defend

For many independent advisors, "compliance" falls somewhere between necessary and adversarial. It doesn't have to.

In this episode, Steven Watts sits down with Joe Krcma, Chief Compliance Officer, and Jane Maccubbin, Senior Compliance Officer at Founders Financial, to explore what a relationship-driven compliance team actually looks like — and how that approach can serve, protect, and defend an advisor differently than a rules-only "no department." They dig into where regulators are honing in right now (cyber and AI), why "clarity through enforcement" forces firms to read the tea leaves, and the well-intentioned mistakes that trip advisors up. The conversation closes with concrete habits — current U4s, disciplined notes — that meaningfully reduce risk.

More from Founders Financial: 

TRU Enterprise OS (compliance is part of the integrated platform): https://foundersfinancial.com/tru-enterprise-os/

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© 2014-2026 Founders Financial. Member FINRA/SIPC and Registered Investment Adviser. All Rights Reserved.

Transcript

SPEAKER_00 0:00

From Founders Financial, this is the Built By and For podcast. Partner-to-partner conversations for independent financial advisors. Today, host Steven Watts, Chief Growth Officer at Founders Financial, sits down with Joe Kirchma, Chief Compliance Officer, and Jane McCubbin, Senior Compliance Officer at Founders Financial to discuss relationship-driven compliance and where regulators are honing in right now. For a lot of independent advisors, the word compliance lands somewhere between necessary and adversarial. It doesn't have to. Here's the conversation.

SPEAKER_04 0:37

Thanks for joining us. Excited to be here. Thanks for having us. Sometimes that's a good thing, sometimes that's not a good thing. Compliance, right? We got the two right people here for this conversation. And kind of to set to set this up, compliance kind of feels hard these days. That's that's the kind of the gist I'm getting. I've talked to a bunch of advisors, and we talk to even new advisors coming into founders. Compliance is always kind of this issue, right? It feels difficult for a lot of advisors. So I want to have this conversation today and kind of get your thoughts on that, maybe why that is, maybe what are some of the misunderstandings that are out there, and uh maybe see some of the the ways advisors can can can help alleviate that concern, uh, if there is that concern that they're having. So um let's kind of get this thing teed up the right way. Um in today's highly regulated environment, right? Describe the world of compliance in one or two words, best you can. Um ever changing. Ever changing.

SPEAKER_02 1:37

Yeah. I'd say gray.

SPEAKER_04 1:40

Gray. Yeah, it feels very unclear, right? And that's that's kind of interesting, right? Because the there's so much regulation these days, right? It's it seems like there's more and more of it as the as the minute passes, right? But it still feels very unclear. Absolutely. Yeah. So that's interesting. That's probably where a lot of the uh the angst is coming from the advisors that we're talking to.

SPEAKER_03 1:59

The difficulty comes. The difficulty really comes because the more the regulatory bodies attempt to give clarity, the more they, in my opinion, money the water. Yeah. Um, because the way they give clarity is through further documentation and further um writings, um, which by the very nature of compliance, attorneys, compliance officers dive into and literally pick apart word by word. Right. And so any missword, any double entendre, any anything in these written releases just get torn apart. Um, rightfully so, to your opening comments, where historically you've got to be one step ahead of the regulators and how they're going to interpret um words like reasonable and prompt. Um so yeah, so that's how it ends up here.

SPEAKER_04 2:50

Yeah, so how how does this feel for an advisor actually in their practice, in their office, day-to-day, dealing with an environment that's that's like that? What what's that feeling like for an advisor? Like a swing of demo.

SPEAKER_02 3:01

Yeah, so Yeah, I think it's really relying and following the leadership that you get from your firm and from your your compliance team because to Joe's point, it's there I'm often asked, show me the rule that says I can't blank. That doesn't exist. The rule is act in someone's best interest or your fiduciary. Is there a don't steal from grandma rule? There's not. But it is implied from the rule.

SPEAKER_04 3:23

There should be a don't steal from grandma rule.

SPEAKER_02 3:24

But it's implied and inferred throughout everything. And so you really need to take a step back and ask yourself, am I doing what is right for my relationship? Am I doing what I feel is morally and ethically right? Um, and have I taken the appropriate steps to to get there? And and and and I think if you start from that that place of of servant leadership and of moral clarity, you're you're going to comply. And then you look to your it's look to the business to find out that how do I document that.

SPEAKER_03 3:55

Yeah, I would agree. I I would say um it starts with the golden rule. Um, and then the next step is communication, communication with your compliance team. If you don't have a great relationship uh with your compliance team, um I I'd be looking for a new home. Um because that that's what's gonna save you every time. The ability to ask questions ahead of time without feeling like they're gonna come get you. Um the ability to have a conversation and just say, This is what I'm thinking. I can't tell you how many times we have a conversation with someone that says, I'm thinking about doing this, um, which gives us the opportunity, again, not to be the no uh department, but to say, fine, here's what you need to do ahead of time to get you there.

SPEAKER_04 4:37

Yeah, so so what has changed like significantly over the last couple of years? Is it is it the rules that everyone has to live by? Is it the interpretation of those rules? Uh, is it the pace of how these rules are coming out? So give me give me a sense of how has that that that moved, how has that line moved the last, let's call it five years, whatever it might be, uh, in your opinion?

SPEAKER_02 4:57

Sure. So I'm gonna say that it's the pace, but it's not the pace of the rules because there's not as many new rules. What but what the regulators have been clear on is that they are not going to clarify or update rules, they're going to clarify through enforcement. And what that means is that we are constantly reading the headlines to understand how how the regulators are interpreting these rules and how they are how they are enforcing them. Because going back to you know, my earlier comment, we have these broad goals of do good, be a fiduciary, do someone's best interest. And then they say to the firms, now you interpret that, you figure out the the what and the how, but then they're gonna come in and tell you did do they agree with you. And so you um you're spending a lot of time determining the the you know that the what and how and then watching the headlines to see, did I do it right? And so from that lens, it's changing on almost a daily basis because there's constant court cases and enforcement actions and you know, just trying to keep, you know, read the tea leaves because that's really what it is that we're we're doing right now. We're not getting black and white clarity on you can do this and you can't do that. I mean, occasionally we do, but not not often. It's really, hey, they've they've mentioned this topic three or four times in the last six months. I think that's what we're gonna see next. And are we positioned for that?

SPEAKER_04 6:25

Yeah, it's interesting. It's like um it almost feels like maybe there's so much and and it's so unclear that there's this angst of not knowing where to go because they're just it's so complicated, right? It's it's so unclear that it's like paralysis by analysis in many ways, right? Yeah. Which is it's not a not a good position for compliance teams or for the advisors that are impacted.

SPEAKER_03 6:46

And that's why you have this uh overarching standard of a risk-based compliance approach. Um so that it's it's for better or worse, your determination of where the risks lie in your business to focus your time and efforts. And they will come behind you and decide whether your risks were appropriate or not. Yeah.

SPEAKER_04 7:03

Right. Yeah. Um so where are you seeing the the most regulatory attention right now? Like where where are they where are they honing in at? Where's where are they they focusing?

SPEAKER_03 7:12

Yeah, without without question, I'll I'll I'll broadly say it's technology and then more specifically cybersecurity and AI. Yeah. Um, without question, that is that is number one with a bullet. Um cybersecurity is not new. Uh they've been on the cybersecurity um hunt, uh, but because it is always evolving, always changing, um, just when a regulator believes they've solved spam or you know phishing or whatever, there's a new perpetration out there that that they're now having to try and solve for. Um so cyber is always in the hunt, and then in this past year it's really been AI. Um always comes back to AI, right? It's all all relevant back to AI, right? Yeah. It's it's how the the the use of it is inevitable. So now they want to uh determine, okay, how is it appropriate?

SPEAKER_04 8:04

Yeah.

SPEAKER_03 8:04

Yeah.

SPEAKER_04 8:05

And the that that is still unclear these days, right? So you're you're you're you're kind of guiding your chart in the scroll so that a really clear roadmap. Um for the regulators. Absolutely.

SPEAKER_03 8:14

And and and again, to as you said, it's universal. I mean, there's law firms are struggling with this, medical industry is still with this, financials, everyone's struggling with how how to properly utilize a tool that is AI. Yeah.

SPEAKER_02 8:26

And then and to build on that, so there's how you use AI in your business, but then going back to that cybersecurity lens of we're using AI, the criminals are using AI as well. And so how are you mouse game?

SPEAKER_04 8:40

Are you constantly leaping over? Yeah.

SPEAKER_02 8:42

Exactly. So, you know, are there do we have holes and are they sufficiently plugged to to prevent people from being able to access our enterprise through these ever-evolving tools that are really powerful?

SPEAKER_04 8:55

Yeah, it's always trying to plug the hole in the dam, right? Yeah. Absolutely. So w Jane, would you would you say that cyber in general, and certainly AI get lumped into that as we go forward, but cyber right now, is that a blind spot for many advisors these days? Is that where they've kind of got a lot of stuff kind of figured out? It's kind of more historical, it's legacy. They've kind of kind of they have some level of control, you know, the the you know, it's still unclear in some areas, but is cyber a blind spot for a lot of advisors these days when it comes to a compliance risk?

SPEAKER_02 9:24

Absolutely, because people aren't thinking about what happens if I take my cell phone to the airport. We have, you know, we feel that if something hasn't physically happened to us, that I that you haven't been a victim. But the reality is I can take my phone through an airport, sit it down to wash my hands, and someone can put their phone next to mine and they can take information off of it that I don't even realize happened. And so firms really need to be thoughtful and make that investment in in cybersecurity and it uh to protect themselves of what are the what are the things that I don't that I that I don't know. And so a lot of people are hesitant to to make that leap because it feels intrusive or it's too much or just the the cost to to get there. But the reality is is that at some point someone's going to become a victim and that recovery is even worse. And and I think that so people need to assume it it's not a case of it, it it won't happen, it just hasn't happened yet. So, how do you put those protections in place to to prevent it from happening at all? Because one thing that that Joe likes to say is that you know, we have to be right every time, they only have to be right once.

SPEAKER_05 10:35

Yeah.

SPEAKER_02 10:36

And and so you need to go into it with that lens of okay, I need I need to protect my relationships, I need to ret protect my firm. And how do I do that?

SPEAKER_04 10:45

I feel like we should be a compliance bumper sticker.

SPEAKER_05 10:48

Right.

SPEAKER_04 10:49

Yeah, right. That's exactly right. Yeah, that's great. Um, yeah, and it's and let's be honest, I mean, advisors, they're they're not IT experts, they're not cybersecurity experts. This is a this is a gray area for them. They don't really understand. So to me, the the the onus has to be on the firms, right? They have to be able to support those advisors because it's it's unrealistic to think an advisor is gonna become a cybersecurity expert overnight. That's just not realistic, right?

SPEAKER_03 11:11

It's it's not realistic, it's not fair. Um and even going more broadly, I mean, the the advisors' focus should always be the relationships. Yeah. Our focus should be everything else, right? Supporting them. And I think firms in the industry um are grossly behind in the world of cybersecurity. Um, just speaking to members uh of other firms or certainly CCOs of other firms, some of the tools and some of their processes, I cringe uh because of the manner in which they're monitoring emails, for example, uh things of that nature. Um I they they they need to catch up. And the reason it's expensive. The ROI on compliance is not high.

SPEAKER_04 11:51

Um it's it's just you know, it's just the expense on the other end of it. Is it like insurance that you're gonna make sure that you know you're gonna pay into, but you have to never use it?

SPEAKER_05 11:58

It's exactly right.

SPEAKER_03 11:59

It's exactly right. I always call compliance the unsexy CIA. I mean, nobody knows we exist until you don't want to know we exist. Yeah, exactly. Um it's the exact same idea. You're paying for something that you hope you never use.

SPEAKER_04 12:10

Yeah. That makes total sense. So um so let's get into the evolving role of compliance and the evolving role of the compliance team. And I think it's a it's a great kind of segue from that last conversation. Yeah. You know, how how has the role of compliance, the team, your team, how has it changed over time?

SPEAKER_03 12:29

It's all about the relationship. Um so I would say I've been doing compliance now for over 30 years. Um, and I certainly was in the world of um the the police and the and the the no department uh when this whole thing started. Uh compliant.

SPEAKER_04 12:44

Is that still the case? Uh is compliance still the police, the no department in in the grander. It depends on the company. I think it depends on where you are. Okay. Yep.

SPEAKER_03 12:51

I think um at a larger uh multi-tiered tens of thousands of advisors, they have to be. They have to be. Because how can you possibly you have to work to the lowest com denominator in those firms? And that means that all these other guys are gonna get no for no good reason other than, well, we're watching out because of the lowest con denominator. Yeah. Um when you're at a more boutique firm, you have the privilege of of those relationships. Um, and in those relationships, you then can treat it as a one-on-one situation where where you may uh not but you may be a no uh because of the facts and circumstances of your situation. But the exact same request coming from Jane because of different facts and circumstances could be a yes. And it's all a matter of context and a matter of digging in and knowing the details. Right. Um, if we have 30,000 advisors, I can't possibly staff properly to know every situation. Which is why we don't do that, right? Which is why we don't do it. Yeah, we we want to get to yes as often as we can. And if the answer is gonna be no, it's gonna be no with a reason. Um and so it it's all about the relationship, yeah. Yeah.

SPEAKER_02 13:57

Absolutely. Uh so the only thing that I would add on to that is the the other piece that has changed significantly is the relationship with technology and the technology professionals that we we work with. So I come, um, I I grew up in operations and then I moved into compliance. And so when I was in operations to Joe's point, you know, the less you talk to compliance, the better your the better your life was.

SPEAKER_04 14:21

Um but but I'm sure some advisors feel the same way about that too. Right.

SPEAKER_02 14:26

But I am a delight.

SPEAKER_04 14:28

I'm not singling you out personally. I may be single him out.

SPEAKER_03 14:31

Me, more me. More more advisors speak to you than me these days, let's be honest.

SPEAKER_04 14:36

That's my choice.

SPEAKER_02 14:40

But but you go look at the role of compliance 20, 30 years ago, and it was almost synonymous with legal. So, you know, it's it's it was one department.

SPEAKER_03 14:49

Where I came from, it was one department. It was legal and compliance department. Exactly.

SPEAKER_02 14:52

Yeah, what do the lawyers say? What do the what do the law say? And and today it's really a partnership with hey, let's go grab technology and talk about what are you seeing? You know, here's what I'm seeing in the headlines. What are you seeing in activity? How do we come together and find a solution? And I never, when I when I entered compliance, I never thought that I would be learning as much about cybersecurity as to your point about it's not fair to ask uh you know advisors to become cybersecurity professionals.

SPEAKER_05 15:18

Well yeah.

SPEAKER_02 15:20

But but really that's you know, for me to be able to do my job well, I need to understand those things. And and that's that's been a big shift.

SPEAKER_04 15:26

Yeah. So let's let's go back to that. You were talking about the the boutique firms and the larger firms and kind of how you know they just have to be different. So when we talk about service and serving advisors at that boutique level, that smaller level, where you can be more intimate. You're not you're not constrained by having to serve you know tens of thousands of advisors out there. Talked about that that serve model versus the the police model, the one that's gonna slow them down. Like talk about the relationship there and and uniquely, you know, how we do it, which is very different than how I would assume any other firms do it.

SPEAKER_03 16:00

So our mission uh in compliance is serve, protect, defend, and it's intentionally in that order. Um we will always look to serve uh our community to the to the best ability we have um and get them where they want to be. Um however, we will also protect them, and that means all of them. Um so if doing the exact thing that you want, Steve, harms Jane, it's just gonna be a no. And I'm gonna tell you why. Um so we're gonna protect the entire community. And ultimately, when that hole in the dike appears or when there's that ding, we're gonna defend and we're gonna defend hard. Now, we may pull you aside afterwards, say, let's let's have this conversation about what could have been done better. But outside our four walls, it is defend all day long every day because we're family, we're a community. Um, if you've been invited to be a part of this boutique firm, then you're in and you're into a long haul. Yeah. Yeah.

SPEAKER_02 16:56

So for me, it's really about getting to know advisors one-on-one to understand what motivates them, what's their philosophy, how do they serve. Um and when I say their philosophy, what is their their philosophy on on investing? What is their philosophy on how they help their clients achieve their dreams and goals? Um, you know, in a prior life, there was an executive who said, you know, we're we're here to help people save for a 30-year retirement. What more noble cause is that? Uh or 30-year vacation, sorry. Um, and and so I want to understand and get to know my advisors at that level to say, how how are you achieving that? And then also, do you believe that? Because if I can get to a point where I trust you, and and I have to be able to trust you. For me, for me to do my job effectively and to to help you, you know, do your job, we we have to come to a to a point of trust. And so that's where I have to understand and get to know you one-on-one. Whereas at a at a larger firm, yeah, the only people you're talking to are the pro the problem children. The only um and and so you are looking at who's who's the person who's gonna cost the firm the most, and and that's what we're building our our rules to. But at in an at a boutique firm and an independent firm, everyone has different philosophies and thoughts on how they how they achieve these goals. And it's important that we understand them all and to be able to adjust and flex.

SPEAKER_04 18:15

Well, it gets back to that. To me, it what it sounds like is you have options, right? Your option is you know, you can go to a place where, hey, they're gonna kind of uh you know run things by the numbers, they're they're gonna you know do things by the letter, right? And and we do things by the letter as well. But if you want that intimate one-on-one kind of human connection where you you understand the gray areas a little bit better, and you still make black and white decisions, but you understand the gray a little bit better, like that's what that's what you're gonna get. That human connection is that's exactly right.

SPEAKER_03 18:45

I mean, and there's a there's a I guess there's a place for both, right? Yeah, if you don't want to be connected, yeah. You want to just do your own thing, give me my you know, my list of options uh at the grocery store and I'll go pick them off and keep me disconnected, right? I will stay out of your hair and you stay out of mine. I I mean there's a place for that. That that's just not how we are. And that's okay if I was okay. There's a place for that. Absolutely. Um, but that's the antithesis of what we are. Yeah. I mean, we know uh the members of our community intimately. I mean, we know their hobbies, their skills, their families, and we want to uh because again, that's how that trust is built, that's how the relationships are built, um, and how we understand them.

SPEAKER_04 19:22

Yeah. All right. So so give me a couple things that, and this could be a this could be kind of a fun question, right? So what what are some of the things that advisors would be surprised about the compliance team? Like what do they what do they do that they don't really realize they do? You know, just give me some insight, give me the peak behind the curtain, you know, give advisors the peek behind the curtain that they would be surprised to to know about compliance.

SPEAKER_02 19:46

So this isn't a fun answer. It's okay.

SPEAKER_04 19:49

Yeah, they don't have to be fun. But um I set it up hoping to get a fun answer, but I wasn't expecting expecting one.

SPEAKER_02 19:54

So the so the fun answer is we crack jokes all the time. Um but but the uh the real answer is the advocacy. So we are constantly, whether it's working with regulators or with states or whomever, of um of you know, do defending and answering what's what's going on. And so when I'll I'll you know talk to an advisor and I'll say, Oh yeah, so and you know, so and so asked about this, and they're like, I I never knew. I'm like, Yeah, you're welcome because I I know you, I understand your business, I understand your client base well enough that we were able to to answer the questions. Um and so and and that yeah, that that level of advocacy, you know, we're I I mean, I don't want to imply that we're we're we're not constantly talking to regulators, but when we do, I mean we're we're we're going about 100%.

SPEAKER_03 20:44

Yeah. Yeah, I would say it's the the interesting thing that I think others wouldn't think of is the last thing we want to do is get into debate um with a member of our community, whether that's a debate over a piece of rejected business or a debate over a request that they've made. Um what we want to do is get you where you need to be. And then what you need to resp right respect and understand is that we have done the work. Um nothing is less efficient than a NIGO. Nothing gives us more trauma at night than having to reject that piece of business, knowing that we're we're now literally rolling water twice. Yeah. So if we can get that piece of business approved, we want to. Um, we have had uh specific meetings, understanding that how painful it is on the advisor side to get that NIGO. Because we understand that you're at the marathon one foot line when that piece of business comes in. You may have been working for 10 years to get this relationship, and you finally got them in for that first meeting, the second meeting, the third meeting, you finally got them to agree to this one, then you finally get the paperwork to them, then you finally get them to sign. It the last thing was, oh, now you've getting sung again. Yeah. We get it. This could this is not something that happens in two minutes. This is potentially years of work. So if we cannot reject that, we very much want to.

SPEAKER_04 22:12

Yeah, and I'm my assumption was going to be that, and I don't know if it's true across the board, I know it's true for the group that I get to interact with you two and the rest of the team, is I don't think you guys want to be the police, right? I don't think you want to be the hammer, right? It's part of the job sometimes, right? But I think you'd rather just have great relationships and help people work through problems and be problem solvers. Yeah. Right. And and and that that I wonder if advisors think that about the compliance teams they work with, uh they might they might think they enjoy being the police, but I don't think that's actually the case. No, it's not.

SPEAKER_03 22:43

And and I I think he's a tough job if that's what that's what you're in. It's it would be grueling, frankly. Um I I know for a fact that's not the case here because I I speak really with with our members. And um on more than one occasion, frankly, in the past several months, uh I've talked to members who used the term, I appreciated that it's we, not me. Yeah. That specific term was used, and that's why it stuck with me. Um so I know in our community it's felt. Yeah. Yeah.

SPEAKER_04 23:12

I want to go back to the technology piece for a second. Um how has technology both increased the risk and responsibility for compliance teams and maybe advisors as well, but specifically for compliance teams, how is technology kind of, you know.

SPEAKER_03 23:28

So the lowest hanging fruit on that is sampling. Um, the world of advisory was was and is very gray. And uh part of that is the supervision and surveillance. In the world of rogue dealer or FINRA is much more prescribed, uh, it's much more deliberate in the rules and regulations. The SEC and the advisory side is much broader and it's much more interpretive. Um, and so in the past, use had to have a reasonable process under surveillance, uh, uh broadly speaking. And so that meant sampling. Pull one out, it's yeah, pull 10% of it, pull 20% for whatever is reasonable based on a risk-based approach. Um, technology put that on its head because with modern technology, you have the ability now to see everything. Um, and it's now not to say, well, I can only sample because you know we only have so many man hours in a day. Not with technology. You should be able to see everything if you're not gonna be able to do that. Properly the technology, you should be able to do everything. So, sampling, I would say, is a large change to um, you know, tactically speaking, from technology. Yeah, that's interesting.

SPEAKER_02 24:32

Yeah, so it's definitely giving you a much broader view. Uh, but the the the counterside to that, and this is one of the um the concerns that regulators have around AI, is that AI can give you some amazing outputs, but is right. Sometimes it's hopefully it's right.

SPEAKER_04 24:48

And so we're still the Wawa West right now a little bit. Yeah.

SPEAKER_02 24:52

And so the question is, you know, well, how are you supervising that? How do I supervise a computer a robot?

SPEAKER_04 24:56

I well I I feel like until the the AI uh technology companies can remove that disclaimer that says AI generated content may be incorrectly verified, then that's always gonna be the case. And I don't think the disclaimer's going away anytime.

SPEAKER_02 25:10

So I so I think the other the other piece though with technology uh beyond that is that you know technology is great for making things happen faster. And when it is built correctly, that's great. When it's not built correctly, then sometimes you are, you know, there you don't have those those natural stops to prevent maybe an error from happening. You can't unspill the milk. And so that's uh I think that's that's one of the other complexities that's come out of technology is that now, you know, I mean, and this isn't really technology, but five years ago trade settlement was T plus three days. If you had to do a correction, you had a little bit of breathing room. Now it's T plus one. So things are just happening much, much faster. And trying to trying to fix things or perhaps get ahead of things, but your your window is very narrow.

SPEAKER_04 26:01

Well, the expectation of what is reasonable has significantly increased. Yes, right. And the the the pace of which the technology advanced has come on so rapidly. Yeah, right. And it changes by the day, by the week, right? It's it's it's it's there and it's changing every every moment. That has to has it has to have had you know a big ripple effect on all of this.

SPEAKER_03 26:22

Yeah, it is. And and so so here is a place where compliance is the one hitting the brakes, like slow down, slow down. Um, it's a tool, it's not a solution. Yeah, everyone needs to slow down. Um, and so speaking to advisors, speaking within you know, the the back office functionings, um, it's a lot. I think our main role here is to be the one asking the questions. Have you thought about this? How did you get to this? Right. You know, ha ha have you know played both sides of this as devil's advocate, not just said, yep, it's AI is wonderful at affirming what you already believe. So somebody has to be the one saying, maybe that's not right. Yeah. Yeah.

SPEAKER_04 26:59

Yeah, I love that saying. It's like it's a it's a it's a it's a tool, not a solution, right? I mean, a hammer you can use to build something, you can also use it to destroy something, right? So you know it's it's a tool. Yep.

unknown 27:09

Yep.

SPEAKER_02 27:10

Yeah, I think where I see advisors um maybe going with strike is they'll they'll use an an AI solution, like, wow, did you see this output? This is amazing. It's fun. It is, it is fun.

SPEAKER_05 27:23

Yeah.

SPEAKER_02 27:23

And then I have to be the one to say, did you test that? Did you go back and verify that that that what it gave you was right?

SPEAKER_05 27:29

Yeah.

SPEAKER_02 27:30

And and that's, you know, I'm I'm a little bit of a spoil sport these days because we'll see something that looks really, really impressive, and then we go back and test it. Oh, it only captured 50%. Or no, it told me a rule from a completely different state that isn't even relevant in this situation.

SPEAKER_04 27:46

It's sort of like if you if you hired like a new assistant for your practice, right? And and he or she was brand new and they've just been working less than a month. Yeah, you had them run all this through these ports, right? And they came back with this nicely detailed, looks beautiful, right? But they're so new, you'd probably go double check their work, right? Right. You probably don't, because they're new, they're a new employee, they're still learning. The AI is still learning. And AI is in many ways, it's a it's a new employee you're bringing into your firm, right? There's that you trust but verify, right? The old the old model, right?

SPEAKER_03 28:13

So that that that's to your point of cybersecurity, this is another area where you know we have we have needed to become experts in AI quickly for any number of reasons. Yeah, ahead of what I would say a lot of other departments, industries needed to uh because of how it's being used by clients, by advisors, by third party money managers, by attorneys, um, you name it. Um and so we've had to become experts at saying uh, okay, well, have you tested this this way? What did you use to prompt it? You know, one of the people if you if you dig in AI, the big thing is all about the prompting. And so we've got to learn about prompting.

SPEAKER_04 28:49

Um, I'm gonna toot our own horn on this fancy firm. We we've done a great job with cyber. We've done a great job with with thinking about technology from a from a different lens. And and going back to the conversation earlier where some fake firms are behind on on the cyber thing, we've been well ahead of it. Yes, which is pretty cool because we're we're skating to where the puck is going, not where it is.

SPEAKER_03 29:09

Yeah, and I'm uh I I know we are both very proud of that.

SPEAKER_04 29:12

Yeah, and you guys have to do with that. So yeah.

SPEAKER_02 29:14

Yeah, I mean, we we come to to that from a position of strength and we've been there for a while. Um, which is which is pretty cool. You know, we know that when we're asked questions about cybersecurity or when we see other firms getting dinged for cybersecurity, and I'll go through and say what were the deficiencies that these other firms had. Right. We've not not only do we not have those deficiencies, we've had those addressed for years.

SPEAKER_03 29:37

Yeah, the funny thing is the fear that other firms that are hesitant to go down this path is their advisors are gonna leave, the advisors are gonna hate them, their advisors are gonna resist it. Yeah, our advisors thank us routinely.

SPEAKER_04 29:53

Well, we were at that conference when we first uh first uh opened it up, right? And we were prepared for some pushback. And reality is um they they know this is coming. Advisors are smart people, right? They know what's coming, they know the reality, they know it also they're not experts at this. And if if they're really aligned with protecting themselves, their clients, the data, and making sure they don't fall into that that newspaper headline, right? Uh one day. Yep. Um they they they understand, right?

SPEAKER_03 30:19

And they've all been there. Everyone, if not themselves, has a mother, a father, an aunt, an uncle, a neighbor who's been hacked and had their credit card taken and their ID stolen, all that stuff. And they know, man, if that's one of my clients, that's my reputation. You know, you can't get that back.

SPEAKER_04 30:34

What's going to lead into next thing I want to talk about? And but it it goes back to if if advisors working with their compliance team trust that it's about protecting them and their partnership and their relationship. It's not about just protecting the firm, which is important. Compliance does that too, obviously, right? Then then there's more openness to when these things come about. Hey, we trust these folks. They they've been by our side. Um, you know, let's let's let's hear them out, right? Yeah. And that I think that's worked really well for us, obviously. So but like I said, that that that kind of dovetails nicely into where I want to go next, which is um this idea that advisors these days, they really can't be hands-off with their compliance. Like, because otherwise compliance is gonna be hands-on with them, right? So that's right. Um they they they want to create that that relationship if they can. We understand that if they're at the the big, big major firms, that may be more challenging, unless you're you know one of the big, big producers at that firm. Um but talk to me about why uh hands-off approach with the compliance, especially if you're at you know a mid-size or boutique firm, why that's sort of risky for advisors.

SPEAKER_03 31:37

That's a huge risk for an advisor. Um, yeah, you know, I would say that that that probably is your number one risk if you play it out. Um if you're not uh well known and and within the knowledge circle of compliance, that you're not uh aware of them and they're aware of you, the tentacles of that never end. So to the extreme, uh you're hands off with compliance to the point of not being aware of changes. Um, you know, compliance is the department's gonna communicate changes to you, whether it's a change to a gift rule or policy, a change to a form, a change to regulation. If you're gonna say hands off, then the fundamentals are gonna be missed by you. So just start there if you're at your worst extreme. If you then pull, say, okay, no, I'll I mean, I'll read stuff, I'll know stuff so I know it's changing, fine. Then if you're not gonna be engaged with compliance, um, you are, as you alluded to before, gonna make compliance engage with you because we're not, you know, this isn't our first rodeo. We're not new to this. Those that are hesitant to to have conversations with us are gonna percolate up for obvious reasons. It's not the what are they hiding? It's why don't I know more about you? Sure. Um again, I'll go back to if if you are a member of this community, you've already earned the trust. It's yours to lose, but you have it. You have my absolute trust, faith, you're doing the best thing. So if we're not in a relationship, I want to get in that relationship because I want to get to know you more. Um, and if you then you're still hesitant to it, now now my intent is gonna start going up, you know. And I I don't ask, you know, what am I doing wrong? What am I, what am I, and and have that conversation with them because I need to know you. Um that's how that trust is built, that relationship is built.

SPEAKER_04 33:22

Well, there's a fundamental risk too. If if they wait too long on an issue to engage you guys, that compounds the issue. I'm a father of two girls, right? I always talk to them all the time. It's like, you know, if if you're if you're if you did something wrong, right, or you want to go do something, come talk to me first, right? You know, trying to hide it or trying to to you know to get it by me, that's always gonna be worse, right? So it's feeling kind of the same way, right? Just you know, waiting too long when there's an issue arises, or if you want to go do something, there would there may be a gray area, you you should engage compliance. It's always gonna be better.

SPEAKER_02 33:53

I would yeah. So if you're in the industry long enough, you there will be a problem. And it's not unavoidable.

SPEAKER_04 34:00

Yes, yes, it is unavoidable.

SPEAKER_02 34:01

Yeah, it really is. I mean, going back to the deck is stacked against you.

SPEAKER_04 34:05

There will be a problem more likely.

SPEAKER_02 34:07

People are very sensitive about their money. That is their future. Shocker. Right, exactly. So even when I hear, oh, that's that's my cousin.

unknown 34:15

Yep.

SPEAKER_02 34:16

Yeah. You want me to tell you about the about cousins that have sued other cousins? So but if you, you know, you if you don't have that relationship, then you're you're going to try to solve that problem yourself. Whether um and you might have the the best of intentions, but we know they say that you know the road to hell is paved with good intentions. So you might say something or do something that actually makes it worse and makes it harder for us to to help you and to to help your relationship. And so if we have an if you have an ongoing relationship with compliance, I we'll get phone calls of just, hey, you know what, this person said something, it just didn't sit right with me. Can we can we talk through it? I don't I don't have a complaint, I don't have a problem yet, but what are the things that I should be thinking about? And those are the types of relationships that I like to have with my advisors because I want them to feel welcome and able to have that conversation with me because we get ahead of things.

SPEAKER_04 35:10

Yep. That's great. Yeah, we have a lot of those relationships too. Maybe here I I just did hear about.

SPEAKER_03 35:14

So yeah, no, I mean it's it's routine that we have these type of conversations because uh you know, as Jane said, humans are a are a fickle and funny creature in the whole world. Add to that their money, and you're dealing with, I mean, people will talk about their their marriage life, their kids, their faith, all before they talk about their money. You know, ask somebody about their faith, their family, then ask how much they make a year. And you're just they're they're very funny about money. And so you're you're dancing on a pin as an advisor. So the more people you get in your army, um, you know, as we say all the time, when an advisor maybe experience for the first time in their career, we've probably experienced twice this week.

SPEAKER_04 35:56

Yep. Yep. Yeah, why, why, why ignore that level of experience? Don't put yourself on the eye end. Yeah. Makes no sense. All right, we're gonna wrap up a little bit here. So I want to ask a couple more questions and then uh we'll we'll let you guys go. What are some common well-intentioned? The advisors have all the best intentions in the world, but there's some common well-intentioned mistakes that you often see advisors make that for anyone listening to this right now, listen to this conversation, yeah, they can maybe avoid. Number one with a bullet, they're you for.

SPEAKER_03 36:23

Number one with a bullet. Yeah. Um, so what I mean by that, uh primarily your outside business activity. Oh, yeah. Um, you volunteer, you have the best intentions. You're volunteering in your church, you're volunteering at your kids' school, you know, you're on this board or that board. That needs to be disclosed. Um, you've got to tell your compliance department about that. That by far is uh the number one thing. They're not keeping their U4 clean because we can't help you there. We don't know what you're doing with your church or your school or things like that. And so we we can only ask, hey, has anything changed? And then you've got to slow down and say, oh, wait, this did change. Um, another class example, and this is just, you know, uh unfair, unfortunate, and cruel, that some unfortunate incident occurred. Um, let's just in this instance call it a bankruptcy. Um you've now taken care of that bankruptcy, but you didn't tell the compliance department that you've taken care of that, giving us the opportunity to remove it from your U4. So now, one, you still have it on your U4, and two, uh potentially the first person to find out about is a regulator who's then gonna fine you, you individually, the advisor. The firm doesn't get fined, you do, Mr. and Mrs. Advisor, for not having a current U4. So it's just salt in the womb that you had this bad incident, you finally got it behind you, you forgot to do this, and now you're gonna pay a fine for the regulator for not doing it.

SPEAKER_02 37:53

Yeah, I mean, let's not forget, and I'm being a little cynical here, but Fender is a for-profit organization and they make money through either membership fees and fines. And those are just easy, low-hanging fruit for someone to to find out about. So just disclose it.

SPEAKER_01 38:08

Yeah.

SPEAKER_02 38:08

It's yeah, let let us help you.

SPEAKER_01 38:11

That's a good one.

SPEAKER_02 38:11

So I would say the the other component is notes and under underestimating the value of notes. Because I'll go into an office to to do an audit and I'll see a stack of papers and be like, yeah, I'm gonna get to it. I'm gonna get to it. And they see that as that's that's what they do when they have downtime. Well, spoiler alert, nobody has downtime. But but the reality is that notes are what's gonna save you each and every time. How did you approach something? Who brought an idea to who? Um, what was the research that you did? You know, write it all down, store it in your CRM, do something. Here's a that's a great opportunity to use AI of let AI help you with notes. But the more the better. And and that's an area where I just find that advisors just completely they don't even think about it. They don't think about why they might ever need notes in the future.

SPEAKER_03 39:06

And they know it. They know it. The first thing that we do, if if God forbid you get a client complaint, we're gonna say, okay, uh, go ahead and send us the notes, go ahead and send it, and you can almost see the cringe. You're like, yeah, they know it. They know they know.

SPEAKER_04 39:20

Are there any guidelines on notes that they they the way you have to take a note? I mean, I don't know. It's just usually as comprehensive as it can be. And yeah, okay.

SPEAKER_03 39:28

I my my rule of thumb is give yourself credit for the work you're doing. Um frankly, I think again, with all the best intentions, it's just an afterthought for them. They make 20 phone calls a day. Are they actually giving themselves credit for making 20 phone calls a day? Because uh yeah, six months later, when you know Mrs. Smith passes away and Junior is going through the estate and doesn't like how you treated Mrs. Smith. You never talked to my mom. You never she I haven't seen any conversation with you. Or you have that. You don't have that note to say, Oh, I did speak to her. And the note can simply be date, time, initials. It doesn't have to be anything more than that.

SPEAKER_04 40:12

Yeah. That's interesting.

SPEAKER_03 40:14

But more than that is always better.

SPEAKER_04 40:16

More than that is always better. Yeah. Okay. Good good addition. Good. More than that is always better. All right. So wrapping up here, I'm gonna do some rapid fire questions for you guys, right? So short answers, get right to the point, we'll keep rolling, rolling through these, okay? Um, what is well, Joe, we'll start with you since you're right next to me. What's one mindset shift advisors should make about compliance? Be friends. Be friends. It's a relationship.

SPEAKER_02 40:40

Yeah, I would I would agree completely.

SPEAKER_04 40:42

All right. Joe, uh, I will go back to you. We'll start Jane this time. What's one habit that reduces compliance risk more than advisors realize?

SPEAKER_02 40:49

Notes.

SPEAKER_04 40:50

Notes. Back to notes.

SPEAKER_02 40:51

Yeah, do it immediately after, you know, stop plan the last fit, be like a doctor. The last 15 minutes of your appointment is you writing up your notes. Yeah. Don't move on to the next thing without it.

SPEAKER_03 41:02

Have a process. Don't run from fire to fire. Everything isn't urgent. Slow down, have a process. Yeah, no's very valuable, right? Yeah. Yeah. No is fine.

SPEAKER_04 41:12

Yeah. All right. Um, we'll go back to Joe on this one. Um, Joe's Joe, what is one step advisors can take right now today? If they're listening to this, go do this right now uh to be better positioned going forward. Notes. Same thing. Back to notes. You gotta take notes. Call this a note podcast. Yeah, yeah, yeah. You gotta take notes. Yeah.

SPEAKER_02 41:30

And I sound like a parrot. It it's it's notes and it's having a process of you need to have prescribe what are the what are the things that you do beginning to end with every time you meet with one of your relationships, or what is that, you know, what does that relationship lifestyle look like? Uh and and stick to it.

SPEAKER_03 41:51

You know, but what what what this is saying, two or three questions in, wherever we are. It's not hard, guys. Yeah. It's not. Take your notes, have a process and have a calendar. Hey, every quarter, I'm gonna on Friday take a look at my U4 to make sure it's accurate. Hey, every Monday, I'm gonna look at my calendar for the week of meetings and know what's pre urgency is and know what notes I need to take. Have a process, take note. We're seeing a theme. It's not complicated. No, yeah.

SPEAKER_04 42:15

And and get close to your your compliance team. Right, you're gonna get a relationship with them. I think that's a good place to end it. Um, thanks all for joining us today and thank you. Having a great conversation, really enjoyed it, and hopefully everyone listening uh got some uh some good wisdom and some good insight and they're better prepared going forward next time they either dealing with something or they're gonna establish that better relationship with their with their compliance department. So agreed. Thank you all. Appreciate it. Yep.

SPEAKER_00 42:38

Thanks for spending time with us on the Built By and For podcast. If this conversation resonated, follow the show on Apple Podcasts, Spotify, or YouTube, and share it with an advisor in your circle who's thinking about what comes next. To learn more about Founders Financial and our solutions for independent advisors, visit FoundersFinancial.com. The Built Buy and For Podcast is produced by Founders Financial. The opinions expressed by hosts and guests are their own and do not necessarily reflect the views of Founders Financial. The content is for informational purposes only and is not intended as investment, legal, or tax advice. Securities offered through Founders Financial Securities, LLC, member FINRA, and SIPC, registered investment advisor. Copyright Founders Financial, all rights reserved.