ADV Filing Time Reduced by 80 Hours Annually for Cornerstone

ADV Filing Time Reduced by 80 Hours Annually for Cornerstone

Executive Summary

Cornerstone Advisory Group, a growing RIA managing over $750 million in assets, faced a significant compliance burden with the annual ADV filing process. The traditionally manual and time-consuming process strained their compliance team's resources, diverting attention from crucial risk management and strategic initiatives. By implementing Golden Door Asset's automated ADV solution, Cornerstone dramatically reduced their annual filing time by 80 hours, enabling their compliance team to focus on higher-value activities and improving overall operational efficiency.

The Challenge

Cornerstone Advisory Group, like many Registered Investment Advisors (RIAs), struggled with the laborious process of preparing and filing their Form ADV. Before implementing an automated solution, the ADV filing process was a major drain on their compliance team's time and resources. The challenge wasn't just the time investment; it was the opportunity cost associated with diverting skilled compliance professionals away from more strategic and impactful tasks.

Specifically, their previous ADV filing process involved:

• Manual Data Gathering: Compiling information from disparate systems, including client relationship management (CRM) platforms, portfolio management software, and internal spreadsheets. This often involved manually verifying data points like assets under management (AUM), client demographics, employee information, and business affiliations. The process took approximately 60 hours annually.
• Error-Prone Data Entry: Manually entering data into the ADV forms increased the risk of errors and inconsistencies, potentially leading to regulatory scrutiny. A single error could trigger a review, requiring further investigation and rectification, which could add an additional 10-15 hours to the filing process.
• Lack of Centralized Information: Information necessary for ADV filing was spread across multiple systems, leading to inefficiencies in data access and hindering real-time tracking of changes. For instance, tracking changes in outside business activities (OBAs) or reportable disciplinary events required manual cross-referencing and follow-up, consuming roughly 10 hours per year.
• Increased Compliance Risk: The manual nature of the process made it difficult to ensure accuracy and completeness, potentially exposing Cornerstone to regulatory penalties and reputational damage. A single, overlooked discrepancy in their ADV could lead to a regulatory inquiry costing upwards of $5,000 in legal fees and internal resources to address.
• Scaled Inefficiency: As Cornerstone's AUM and client base grew, the ADV filing burden increased proportionally. They projected that without automation, the annual ADV filing time would increase by an estimated 15-20 hours within the next two years, severely impacting their ability to scale effectively.

Cornerstone’s Chief Compliance Officer (CCO), Sarah Miller, estimated that the total cost of preparing and filing the ADV, including employee time and potential regulatory risks, exceeded $12,000 annually. This expense, coupled with the operational inefficiencies, prompted Cornerstone to seek a more efficient and reliable solution.

The Approach

Golden Door Asset partnered with Cornerstone to streamline their ADV filing process through strategic automation and process optimization. Our approach centered on three key principles:

1. Centralized Data Integration: We aimed to consolidate data from disparate sources into a single, unified platform, eliminating the need for manual data gathering and reducing the risk of errors.
2. Automated Form Population: We sought to automate the population of ADV forms with accurate and up-to-date information, minimizing manual data entry and freeing up the compliance team's time.
3. Continuous Compliance Monitoring: We implemented ongoing monitoring of key compliance metrics to identify potential issues proactively and ensure continuous adherence to regulatory requirements.

Our approach involved the following key steps:

• Needs Assessment: We began by conducting a thorough assessment of Cornerstone's existing ADV filing process, identifying pain points and areas for improvement. This involved interviews with the CCO, compliance team members, and IT personnel.
• Technology Selection: Based on the needs assessment, we selected RIA in a Box's ADV automation software as the optimal solution. RIA in a Box offered robust data integration capabilities, automated form population, and ongoing compliance monitoring.
• System Integration: We integrated RIA in a Box's software with Cornerstone's existing compliance management system, CRM (Salesforce), and portfolio management software (Orion). This integration enabled seamless data flow and eliminated the need for manual data transfer.
• Workflow Optimization: We redesigned Cornerstone's ADV filing workflow to leverage the automated capabilities of RIA in a Box. This involved creating standardized procedures for data validation, form review, and filing.
• Training and Support: We provided comprehensive training and ongoing support to Cornerstone's compliance team, ensuring they were proficient in using the new system and processes.
• Phased Implementation: We implemented the solution in a phased approach, starting with a pilot project to validate the system and processes before rolling it out firm-wide.
• Ongoing Monitoring and Improvement: We continuously monitored the performance of the system and processes, identifying opportunities for further optimization and improvement.

Our strategic decision-making framework prioritized solutions that offered the greatest efficiency gains, reduced compliance risk, and integrated seamlessly with Cornerstone's existing technology infrastructure. We carefully weighed the costs and benefits of various automation options, ultimately selecting RIA in a Box due to its proven track record, comprehensive features, and strong integration capabilities.

Technical Implementation

The technical implementation involved a multi-faceted approach to integrate RIA in a Box's ADV automation software with Cornerstone's existing systems. The key components of the implementation were:

• API Integration: Utilizing RIA in a Box's API (Application Programming Interface), we established a secure connection with Cornerstone's Salesforce CRM and Orion portfolio management system. This allowed for automated data extraction of client demographics, AUM, and other relevant information required for the ADV.
• Data Mapping: We meticulously mapped data fields between Cornerstone's systems and RIA in a Box to ensure accurate data transfer. For example, client addresses in Salesforce were mapped to the corresponding address fields in the ADV form. AUM data from Orion was categorized and allocated correctly according to ADV instructions for regulatory assets under management (RAUM).
• Data Validation Rules: Implemented data validation rules within RIA in a Box to automatically flag any discrepancies or missing information. These rules included checks for data completeness, accuracy, and consistency. For instance, if a client's address was incomplete or a required field was missing, the system would generate an alert.
• SSO (Single Sign-On) Integration: We implemented SSO to streamline the login process and enhance security. This allowed Cornerstone's employees to access RIA in a Box using their existing credentials, eliminating the need for separate usernames and passwords.
• Automated Report Generation: Configured RIA in a Box to automatically generate draft ADV forms based on the integrated data. This eliminated the need for manual data entry and significantly reduced the risk of errors.
• Customized Workflows: Created customized workflows within RIA in a Box to automate the review and approval process for ADV filings. These workflows included automated email notifications and task assignments to ensure timely completion of each step.
• Security Protocols: Ensured all data transfers and storage complied with industry best practices for data security and privacy, including encryption and access controls. Specifically, data was encrypted both in transit and at rest using AES-256 encryption.
• UAT (User Acceptance Testing): Conducted thorough UAT with Cornerstone's compliance team to ensure the system met their requirements and functioned as expected. This involved testing the entire ADV filing process, from data extraction to form submission.

The data mapping process included defining specific calculations for regulatory assets under management (RAUM) based on SEC guidelines. This involved filtering assets based on custody arrangements, performance-based fees, and other relevant factors. The accuracy of these calculations was critical to ensuring compliance with SEC regulations.

Results & ROI

The implementation of Golden Door Asset's automated ADV solution yielded significant results for Cornerstone Advisory Group:

• 80 Hours Reduction in Annual Filing Time: Cornerstone reduced their annual ADV filing time from 100 hours to 20 hours, representing an 80% reduction. This freed up the compliance team's time to focus on more strategic tasks.
• Reduced Error Rate: The automated system significantly reduced the error rate in ADV filings. Prior to automation, approximately 5-10 errors were identified during the review process. After automation, the error rate decreased to less than 1 error per filing.
• Improved Compliance Confidence: The automated system provided greater assurance of compliance with regulatory requirements. Cornerstone's CCO reported increased confidence in the accuracy and completeness of their ADV filings.
• Cost Savings: The reduction in filing time translated into significant cost savings for Cornerstone. By freeing up 80 hours of compliance team time, Cornerstone saved approximately $8,000 annually (based on an estimated hourly rate of $100 for compliance professionals).
• Increased Efficiency: The automated system streamlined the ADV filing process, making it more efficient and less disruptive to the compliance team's workflow. The compliance team now allocates that freed-up time to enhanced risk assessments and client communication regarding compliance matters.
• Improved Scalability: The automated system enabled Cornerstone to scale its ADV filing process more efficiently as its AUM and client base grew. The system can handle increased data volumes without requiring additional manual effort.
• Time to File Reduction: The turnaround time to draft the ADV was reduced from 2 weeks to 3 days.

The ROI of the investment in Golden Door Asset's automated ADV solution was significant for Cornerstone. The direct cost savings, improved compliance confidence, and increased efficiency justified the investment and provided a strong return. Furthermore, the automation positioned Cornerstone for continued growth and success in a rapidly evolving regulatory landscape.

Key Takeaways

Here are three actionable insights for other advisors facing similar challenges:

1. Embrace Automation: Invest in technology solutions that automate repetitive and time-consuming tasks, such as ADV filing. Automation not only reduces costs but also improves accuracy and compliance.
2. Integrate Your Systems: Integrate your CRM, portfolio management, and compliance systems to create a seamless flow of data. This eliminates the need for manual data entry and reduces the risk of errors.
3. Prioritize Compliance: Make compliance a priority and invest in the resources and technology necessary to maintain a strong compliance program. A proactive approach to compliance can help avoid costly regulatory penalties and protect your firm's reputation. Consider the long-term costs of non-compliance when evaluating investment in compliance tools.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors streamline operations, enhance compliance, and unlock insights from their data. Visit our tools to see how we can help your practice.