Financial Services Blog

With the changes facing wealth management firms, it’s time for them to build better business supervision. In my previous post, we talked about calibrating the retail business supervision diagnostic framework. Now, let’s look at executing the new capability. 

A targeted retail business supervision capability review can be delivered through a combination of top-down and bottom-up techniques to assess priority use-cases, benchmark findings across regional branch locations and external peers, and identify opportunities for future model enhancements and technology investments.  

As part of the top-down review, the firm can select a sampling of regional branch locations for on-site environmental assessments. An ideal sampling would include a selection of retail branches from each major region so that any regional nuances (e.g., clientele differences, product demands, competitive landscape) are considered. The sampling should also include branches with known customer experience, compliance or audit issues, to help the firm assess root causes that can best inform the future supervision model design decisions.  

During on-site reviews, the firm should perform workshops and individual interviews with regional leadership, branch managers, business risk & compliance controllers and other selected stakeholders to gain their insights on business direction, emerging risks and customer challenges within the branch, and any other current-state challenges. The firm can also perform job shadowing activities with business risk & compliance controllers and other stakeholders to understand current process challenges.  

To complement on-site reviews, the firm can also apply different bottom-up assessment techniques including document reviews, risk and control process analysis, and employee sentiment surveys, to provide additional color and identify additional issues or potential inconsistencies from regional branch leadership messaging.   

As part of the bottom-up review, the firm should analyze approved exceptions, trade and account surveillance reports, compliance findings and audit investigation materials to identify the priority issues the front office is facing and assess issues trends and regional or specific branch concentration risks.  

The firm can also leverage external sources, including the Financial Industry Regulatory Authority (FINRA) BrokerCheck® database and U.S. Securities and Exchange Commission (SEC) Action Lookup, a search tool to understand if leaders within the firm and regional retail branches have a history of issues with regulatory actions, client complaints and arbitrations, creating a poor tone from the top, or if there are concentrations of employees with historical issues within a branch or region.  

To further the firm’s insights on risk, employee conduct and culture issues, the working group should look to execute branch-wide employee surveys. The structured-question surveys should help assess employee sentiment within the various regional branch locations and identify problematic sub-cultures or discrepancies in views across the firm, helping prioritize future business supervision model requirements.  

Combining results from on-site discussions with regional branch leadership and bottoms-up review methods can help the firm unlock critical insights and inform future business supervision model design decisions.  

After completing the targeted retail branch supervision review, the firm should be positioned to better understand the risks various regional branches face and be better equipped to prioritize risk exposures. The business should be better able to determine which supervisory functions and activities should remain in field and which should move to the central office or require development. The business can also outline effective workforce and technology strategies upon completing the review.  

Insights obtained by leaving the four walls of the home office are key to designing and implementing an effective business supervision model that allows the firm to adapt to the rapidly changing wealth ecosystem while supporting sustainable growth.    

For more information, please review the presentation below.  


Submit a Comment

Your email address will not be published. Required fields are marked *