ADV Filing: Saved 80 Hours Annually with Automation

ADV Filing: Saved 80 Hours Annually with Automation

Executive Summary

Reeves Institutional, an expanding RIA managing over $500 million in assets, struggled with the tedious and time-consuming process of manually compiling and submitting their Form ADV filing. This manual process was not only inefficient but also increased the risk of errors and potential compliance issues. By implementing ACA Compliance Group's ComplianceAlpha platform, Reeves Institutional automated their ADV data entry and filing procedures, resulting in an 80-hour annual time savings and allowing them to redirect valuable resources to client service and business development initiatives.

The Challenge

Reeves Institutional prides itself on providing personalized financial planning and investment management services to high-net-worth individuals and families. With assets under management steadily increasing, the firm’s compliance obligations, particularly related to the Investment Adviser Public Disclosure (IAPD) system and Form ADV filings, were becoming increasingly burdensome.

Prior to automation, the firm’s compliance officer, Sarah Chen, dedicated significant time to manually gathering, verifying, and entering data into the ADV form. This involved:

• Data Collection from Disparate Systems: Pulling client information from their CRM, portfolio management system, and various spreadsheets – a process that typically took 3-4 days each filing cycle.
• Manual Data Entry and Validation: Individually entering data into the ADV form, cross-referencing information, and ensuring accuracy to avoid regulatory scrutiny. This was a particularly time-consuming task, consuming approximately 40 hours per annual update.
• Review and Sign-Off: Manually reviewing the completed ADV form with senior management to ensure accuracy and completeness, adding an additional 8-12 hours.
• Risk of Errors and Omissions: Given the complexity and volume of data, the manual process was prone to errors and omissions, potentially leading to inaccurate disclosures and potential regulatory penalties. A single error could trigger a compliance review, costing the firm valuable time and resources to rectify.

The firm estimated that the manual ADV filing process cost them approximately $15,000 annually in terms of employee time and potential compliance risks. Moreover, Sarah’s time was better spent on proactive compliance activities, such as developing and implementing policies and procedures, training staff, and monitoring regulatory changes, all of which directly impact the quality of service to their clients. The limited time she had for these tasks due to the ADV process was hindering the firm's ability to scale efficiently and maintain a robust compliance program.

The Approach

Reeves Institutional recognized the need for a more efficient and reliable solution to manage their ADV filings. They sought a technology-driven approach that would automate the data collection, validation, and submission process, minimizing manual effort and reducing the risk of errors.

The decision-making framework involved several key considerations:

1. Integration with Existing Systems: The chosen solution needed to seamlessly integrate with the firm’s existing CRM (Salesforce) and portfolio management system (Orion Advisor Services) to automatically pull data and eliminate manual data entry.
2. Data Validation and Accuracy: The solution should include built-in data validation rules and checks to ensure accuracy and completeness of the information reported in the ADV form.
3. Compliance Expertise: The vendor needed to demonstrate a deep understanding of SEC regulations and Form ADV requirements, providing ongoing support and updates to reflect regulatory changes.
4. Scalability: The solution should be scalable to accommodate the firm’s future growth and increasing compliance obligations.
5. Cost-Effectiveness: The overall cost of the solution, including implementation, maintenance, and ongoing support, should be justified by the expected time savings and reduced compliance risks.

After evaluating several options, Reeves Institutional selected ACA Compliance Group's ComplianceAlpha platform. ComplianceAlpha offered a comprehensive suite of compliance solutions, including automated ADV filing, risk assessments, and regulatory reporting. Its ability to seamlessly integrate with Reeves Institutional’s existing systems, its robust data validation capabilities, and its proven track record in the RIA compliance space made it the ideal choice.

Technical Implementation

The implementation of ComplianceAlpha involved a phased approach:

1. System Integration: The first step was to integrate ComplianceAlpha with Reeves Institutional’s Salesforce CRM and Orion Advisor Services portfolio management system. This involved configuring APIs to automatically extract relevant data, such as client demographics, assets under management, and investment strategies. Custom data mapping was implemented to ensure correct field alignment.
2. Data Validation Rules: Configured specific data validation rules within ComplianceAlpha to identify inconsistencies and errors in the data. For example, automated checks were set up to flag missing client information, discrepancies in asset values, and potential conflicts of interest.
3. ADV Form Population: ComplianceAlpha automatically populated the ADV form with the data extracted from the integrated systems. This eliminated the need for manual data entry and reduced the risk of errors. The system pre-populated fields like AUM, business description, and client information.
4. Automated Updates: The system was set up to automatically update the ADV form with any changes in client data or firm information. This ensured that the ADV form remained current and accurate throughout the year. For example, new client accounts would be automatically reflected in the next ADV update.
5. Submission Process: Once the ADV form was completed, ComplianceAlpha facilitated the electronic submission of the form to the SEC's IAPD system. This included generating the required XML files and ensuring compliance with the SEC’s filing requirements.
6. Ongoing Monitoring and Support: ACA Compliance Group provided ongoing monitoring and support to ensure the system was functioning properly and that Reeves Institutional was complying with all applicable regulations. This included regular updates to the platform to reflect regulatory changes and access to a dedicated support team. The firm also received regular alerts related to regulatory changes and potential compliance risks, enhancing their ability to proactively manage their compliance program.

Results & ROI

The implementation of ComplianceAlpha delivered significant results for Reeves Institutional:

• Time Savings: The automated ADV filing process reduced the time spent on ADV filings from approximately 80 hours per year to less than 10 hours per year. This represents an 87.5% reduction in manual effort.
• Cost Reduction: The time savings translated to an estimated annual cost reduction of $12,000. This was calculated based on the hourly rate of the compliance officer ($150/hour) and the reduced time spent on ADV filings (70 hours x $150/hour = $10,500). Factoring in the cost of the subscription and onboarding ($1,500) the overall net savings were still significant.
• Improved Accuracy: The automated data validation and error checking features of ComplianceAlpha significantly reduced the risk of errors and omissions in the ADV form. This resulted in fewer compliance reviews and reduced the potential for regulatory penalties. Prior to implementation, the firm experienced minor errors in approximately 10% of their ADV filings, requiring time-consuming corrections. After implementation, errors were virtually eliminated.
• Increased Efficiency: The automated ADV filing process freed up valuable time for Sarah Chen to focus on more strategic compliance initiatives, such as developing and implementing policies and procedures, training staff, and monitoring regulatory changes. This improved the overall effectiveness of the firm’s compliance program. The time saved was reallocated to more client-facing activities, improving the firm's client retention rate by 5%.
• Enhanced Client Service: By freeing up resources and improving compliance, Reeves Institutional was able to enhance its client service offerings, including providing more personalized financial planning advice and developing new investment strategies. This led to increased client satisfaction and a 10% increase in referrals.

Key Takeaways

Here are some key takeaways for other RIAs considering automating their ADV filing process:

1. Prioritize Integration: Choose a solution that seamlessly integrates with your existing CRM and portfolio management systems to automate data collection and eliminate manual data entry.
2. Focus on Data Validation: Ensure that the solution includes robust data validation rules and checks to ensure accuracy and completeness of the information reported in the ADV form.
3. Seek Compliance Expertise: Partner with a vendor that has a deep understanding of SEC regulations and Form ADV requirements, providing ongoing support and updates to reflect regulatory changes.
4. Consider Scalability: Select a solution that is scalable to accommodate your firm’s future growth and increasing compliance obligations.
5. Quantify the ROI: Carefully evaluate the potential time savings, cost reductions, and improved compliance benefits of automation to justify the investment.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors proactively identify compliance risks and opportunities to improve client outcomes. Visit our tools to see how we can help your practice.