Crowdsourced Compliance

Are you looking for somebody to take on some of the compliance busywork on your desk, or expertise your CCO hasn’t yet acquired?

Most of you are familiar with the various websites that allow you to post work you want done online, connecting you with free-lancers who will bid on it.  You can get someone to design your logo, paint your house or build PowerPoint slides around your next presentation, hiring the work off of sites like Upwork, FreeLancer, Gengo.ai, Total, People Per Hour, Simply Hired, iFreelance, Aquent, The Creative Group, Croogster, Crowded, Fiverr, FlexJobs, CrowdSource, Project4Hire and, of course, Craigslist.

But if you’re the chief compliance officer at a midsize RIA firm and you need somebody to update your operations manual or catalogue the personal securities transactions of your growing staff, you can search those sites all day and night without finding that ex-state securities regulator or former SEC examiner who knows how it has to be done and enjoys doing what you regard as a painful chore.

For that, you need Complect (http://www.complect.co).

Complect may be the simplest service this writer has ever had to describe: it crowdsources a growing number of people who do free-lance compliance work for a living: compliance consultants, former regulators and individuals who have served as CCOs of large advisory firms.  You post what you need—like, say, a revision of your code of ethics, a second pair of eyes on your marketing materials or a mock audit in advance of the visit by the state examiners—post your budget allowance or what you expect to pay, and compliance professionals around the country bid for the work. 

“There are a lot of one-to-four-person consulting firms out there that nobody knows about,” says Hahn Nguyen, a former consultant with ACA Compliance Group who founded Complect and brought it to the market earlier this year.  “What I discovered is that, with smaller firms, there are a lot of what we call two-hatted CCOs, who are handling the chief compliance officer role in addition to other important activities, who need to add expertise, and also to outsource projects rather than take on the role full-time. 

“With the larger growing firms,” she adds, “you’ll have a full-time CCO who is starting to get overwhelmed, and trying to decide whether to outsource or start hiring a compliance staff.  The firm has grown from a three-person shop when they took the job to 20 people on staff, and now all of a sudden it is taking two weeks every quarter to go through everybody’s personal securities trading.  By the time they’re finished, it’s time to prepare for the next quarter, and meanwhile there are a lot of other things that have to get done.”

Nguyen came to start Complect as a result of two impetuses.  One was her work at ACA, where she would field calls from firms that didn’t have nearly the budget to hire the large national compliance firm, and just needed somebody to take on a particular project.  The other was her fiancée, now husband, who had gone through the frustration of starting a global private equity infrastructure fund and navigating the regulations.  “They hired the top law firms in every jurisdiction,” says Nguyen.  “And they paid a lot of money to get flawed advice.  He told me how frustrating it was not to know where to source the specific expertise he needed, and if you hire a law firm, not to know exactly who is going to be assigned the work, or having a guarantee that the work is going to be done well.”

Compliance lingo

Complect operates very much along the crowdsourcing model: the target market is RIA firms large and small, both looking for ways to outsource tasks that aren’t really suited to a full-time person, plus banks and broker-dealers looking for specialized expertise as they deal with their own regulators.  The platform, still in its build-out stage, currently has 41 specialists bidding on various types of work. 

“Many of them are former regulators, either at the state level or the SEC,” says Nguyen, “and some of them are former FINRA regulators as well.  They can help with literally everything you can possibly imagine.” 

Others are former CCOs at advisory firms who may work at home and take on projects on a free-lance basis.  All of the specialists must have a minimum of three years of regulatory experience, but the average is closer to 10-13 years.

Complect takes care of the billing and invoicing, taking 10% off the top, and ensures that the work is done to the advisory firm’s satisfaction.  There is a rating system that allows advisors to see how satisfied former customers were with the work of each professional.  “We are not incentivized to push you to any particular service provider,” says Nguyen.  “We are incentivized to make sure both parties have an excellent experience in getting the work done, and on the other side, in finding that work on a regular basis.”

Meanwhile, Nguyen herself serves as a consulting resource, primarily for CCOs at smaller firms who are still figuring out the parameters of the job, and may not be aware of the costs of different types of projects.  “At that stage, they’ve volunteered for the job, but they don’t yet speak the compliance lingo,” she says.  “They don’t always know what they need, so I help them set their annual budget and help them understand the pricing.  If you want a former regulator with 20 years of experience, this is what you can expect to pay, vs. somebody who served as an in-house CCO with an advisory firm, who may be more appropriate for the project you need to get off your desk.”

In addition to the part-time and project work, Nguyen expects that advisory firms will find full-time compliance employees through Complect.  “Our platform lets them try out somebody with no risk,” she says, “and then we have a way for them to sign on full-time.”

The firm is also creating a network of “partners”—businesses that offer services that are related to the more common operational challenges in the advisory space.  “For instance, Entreda is a partner,” says Nguyen.  “They do cybersecurity, which is a very hot topic right now.  We’re finding that a lot of the businesses we work with, regardless of whether they’re starting out or moving past $250 million AUM, are constantly looking for new and better service providers.  We want to become a starting point for those searches, and also negotiate discounts with those providers for the Complect community.”

As the regulators become more intrusive in the lives of the financial services industry, Complect seems like the most cost-effective way to handle the growing workload.  The advantages of outsourcing don’t change from one type of project to the next: you tend to get more expertise from the outsource provider than you would from a person who is wearing several hats with no particular compliance training, and you don’t have to provide that training yourself.  You pay only for the work that is done, without the headaches of vacation time and sick days.  There’s a reason the crowdsourcing platforms are growing in every sector of the economy, and Complect, bringing that model to compliance duties, looks like a great resource for the advisory community.