Industry Trends

New Study Uncovers Challenges Amid Tough Regulatory Environment

As compliance teams are stretched thinner than ever, unintended consequences occur

A new study from Hearsay Systems reveals what obstacles firms are facing as we head into 2024 and explains simple changes teams can make to strengthen their operational efficiency. Access the full report here.

SAN FRANCISCO — January 18, 2024 — Hearsay Systems, the trusted global leader in digital client engagement for the financial services industry, today announced the findings from its 2024 Finserv Compliance Study. The annual report analyzed compliance data to surface and highlight powerful industry trends that can significantly impact digital communications review programs.

This analysis included data from 1,371 compliance administrators who supervised more than 36 million activities across social media, text messages, and websites. In total, they routed more than 8 million items to compliance for review on the Hearsay platform, for the 12-month period ending November 2023.

“The SEC’s increased attention on digital compliance has resulted in the most new and proposed rules in decades,” said Bill Simpson, Director of Compliance at Hearsay Systems. “Recent enforcement actions are unprecedented in both size and frequency. This puts tremendous pressure on already overworked compliance teams. Our aim with this report is to shine a light on some of the greatest challenges and the best ways to address them.”

The report comes as compliance departments experience tightened budgets due to economic concerns and rising risks resulting from increased marketing activity and regulatory scrutiny. Hearsay’s proprietary data provides actionable intelligence to compliance leadership on team effectiveness with respect to the supervision of digital communications. Such data-driven insights can empower compliance teams to optimize program effectiveness while reducing personnel-based risks.

Key Findings

  • Compliance teams are overworked, and it’s resulting in unexpected consequences. Resources are flat, volumes are increasing, and yet, turnaround times are decreasing materially. But this is not good news: These trends point to an unexpected reprioritization by reviewers towards high-urgency items—while low-urgency items remain backlogged and unprocessed— that could result in wide implications for regulatory defensibility. This has the potential to also negatively impact employee morale, leading to higher turnover. To alleviate strain and ensure quality, timely reviews, it will be imperative for teams to trim non-value-add tasks while incorporating advanced technology such as AI to maintain the same level of risk mitigation effectiveness.
  • Firms are not taking a differentiated approach to mitigating diverse content risks. One-size-fits-all might be easier to set up when it comes to reviewing content, but it leads to significant bloat and inefficiencies over time. Treating content from various sources differently can meaningfully reduce compliance workloads. Compliance teams should focus their efforts on where risks frequently exist; they should also reassess their approach based on regular performance analysis of supervision programs. This might include challenging existing review procedures like sampling if it’s not producing effective results.
  • Keyword effectiveness is impacted by context. Not surprisingly, the most effective keywords—those that most consistently flagged problematic content—were related to advertising investment products and services. However, keywords associated with LinkedIn connection requests and brand activity required extra work yet posed the least risk. This suggests that firms not only need to be diligent about which words they include in their lexicons but should also take into account the types of communications that lexicons are being applied to, so reviewers can channel their energy into mitigating the risks that matter.

To read more about the findings revealed in Hearsay’s 2024 Finserv Compliance Study–as well as to dive into actionable takeaways– attend Hearsay’s upcoming webinar on January 19.

 

 

 

About Hearsay
As the trusted global leader in digital client engagement for financial services, Hearsay Systems empowers over 225,000 advisors and agents to proactively guide and capture the last mile of digital communications in a compliant manner. The world’s leading financial firms—including BlackRock, Charles Schwab, and New York Life—rely on Hearsay’s compliance-driven platform to scale their reach, optimize sales engagements, grow their business and deliver exceptional client service. Hearsay is headquartered in San Francisco, with globally distributed teams in North America, Europe and Asia.