“Return to Office” Isn’t Happening – Digital Communications Compliance Just Got Trickier

Could the Continued Pandemic Permanent Remote Workforces Make Digital Communications a Regulatory “Achilles Heel” for Wealth Management?

Michael Madden, Contributing Editor, Wealth Solutions Report

It’s hard to describe the fallout from the ongoing pandemic adequately. It disrupted schooling, affecting the academic progress of millions of kids. For some, the lack of personal interaction led to depression and other issues related to mental illness. Meanwhile, whole industries like leisure and hospitality were decimated, with it likely taking years before they rebound entirely. 

For financial services, the lasting impact, while not as ominous, is nonetheless profound: The durability of the remote work trend. 

Not everybody loves the traditional office model

Before the Delta variant compelled many businesses to dial back their September back-to-office plans, many executives touted the benefits of having employees all in one place, saying it led to greater camaraderie and more collaboration. 

Still, the reality is that many workers have grown used to working from home, so many were going to push back against the idea of a Monday-thru-Friday workweek. The implications of remote work on a much more permanent basis for wealth management are enormous, as the flood of digital messages flowing through platforms like Zoom and Microsoft Teams create long-term compliance and regulatory headaches for firms that must retain them. 

WSR recently spoke to Marianna Shafir, Regulatory Advisor at Smarsh, about this and other issues. Portland, Ore.-based Smarsh provides communications archiving services for highly regulated industries, serving over 6,000 customers worldwide, most of which come from the wealth management industry, including eight of the top 10 largest independent broker-dealers.  

Unsurprisingly, it has grown explosively in recent years, as the demand for its offerings has taken off since the beginning of the pandemic. With over 950 employees worldwide, the company manages billions of e-communications messages per month. 

WSR: Many firms have tabled their return-to-the-office plans set for this fall. Do you believe this is due to the delta variant or because of a fundamental change in attitudes about how productive remote work can be? 

In the short term, the interplay between the two – safety concerns and the realization that employees are productive remotely – will continue to drive a lot of press coverage. However, a fundamental disconnect will emerge over time because while most executives want employees to return to the office, many employees prefer the flexibility of working from anywhere, or at least, close by.

We hear it all the time from broker-dealers and advisors – “Why should I deal with a commute, traffic and parking just to get to an office and join a Zoom call?” As a result, more firms are preparing for a future in which hybrid work models become permanent, meaning compliance controls need to work uniformly across remote and in-office environments.

WSR:  How have wealth management firms successfully enhanced their digital communications content capture and compliance practices over the past 18 months? And in what areas have they lagged? 

Wait – How many social media apps do I need to capture and archive content for?

There are two camps. In one, you have firms whose employees and clients tend to be young and/or tech-savvy, so they want to do business leveraging the latest communications tools and feel comfortable doing so. 

These firms have begun to implement compliance resources that safely capture, store and supervise tools like WhatsApp, WeChat, Instagram and YouTube – and, notably, quickly deployed collaborative technology like Slack and Microsoft Teams internally. For them, the pandemic merely hastened the adoption of technologies that they would have been embraced anyway. 

In the other camp, you have the laggards who were forced to adopt these tools because they needed an immediate replacement for face-to-face meetings. In many of these instances, the staff and advisors were less tech-savvy and have faced a steeper learning curve in adjusting to the digital-centric realities of today’s workplace. 

However, for both groups, the hurdles going forward will be the same: To keep up with the quickening pace of innovation and effectively monitor the prohibited tools for a regulated firm.

WSR:  What are the most significant potential regulatory challenges between now and the end of next year that will have significant implications for digital communications compliance?

The biggest challenge stems from the fact that the current regulations governing the use of digital communications record-keeping requirements are decades old, having been put in place when offices relied on paper correspondence and, to a much lesser extent, email. 

Regulators are standing by.

The SEC itself has called this out as an issue. Since regulations lag today’s technology, firms cannot wait for explicit regulatory guidance regarding the use of specific tools, nor can they stand by for a clear marker regarding features such as video recordings or whiteboards. 

Firms, therefore, need to develop internal policies based on information governance best practices, not on definitive regulations.

WSR:  Given the exponential growth of digital messages and content, how do you see the broader digital communications compliance landscape evolving? 

Marianna Shafir, Regulatory Advisor, Smarsh

The growth in volume and variety of digital communications since the beginning of the pandemic has led firms to conclude three things.  One is that they cannot, in any scalable way, manage individual content sources through their own siloed repositories. 

Secondly, the ability to move large datasets to other locations required for supervisory review or e-discovery is no longer feasible, so more firms will need to look for additional processing capabilities to be embedded within content repositories themselves. 

Third, many firms are hitting the limits of manual, human-centric review of policies and lexicons when looking for information risks, which has led many to invest in machine learning and natural language processing to find the threats hiding within disparate data haystacks.

Michael Madden, Contributing Editor & Research Analyst, can be reached at mmadden@wealthsolutionsreport.com 

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