Legacy Bridge Achieves 95% Regulatory Exam Pass Rate

Legacy Bridge Achieves 95% Regulatory Exam Pass Rate

Executive Summary

Legacy Bridge Advisors, facing persistent challenges in achieving satisfactory regulatory exam pass rates among their advisors, sought a solution to mitigate potential liabilities and enhance overall firm compliance. Golden Door Asset developed a customized training curriculum and interactive practice exam platform specifically tailored to key regulatory topics and exam question formats. This targeted approach resulted in Legacy Bridge Advisors achieving a remarkable 95% pass rate on the Series 65 exam, surpassing the industry average by a significant 20% and substantially reducing their compliance risk exposure.

The Challenge

Legacy Bridge Advisors, a growing RIA managing over $750 million in assets for high-net-worth individuals, faced a recurring challenge with their advisors' performance on regulatory exams, specifically the Series 65. Over the past three years, the firm's average pass rate hovered around 75%, significantly below the industry average of 75%, causing considerable concern for Chief Compliance Officer Patricia Brennan.

This low pass rate presented several critical issues. Firstly, it meant increased operational costs. Each failed exam required advisors to retake the test, incurring additional registration fees (approximately $185 per attempt) and lost productivity. With an average of 10 advisors taking the Series 65 exam annually, even a 5% failure rate translated to $925 in direct costs alone. More importantly, lower pass rates indicate a potential lack of understanding of crucial regulations, exposing the firm to increased compliance risks and potential fines from regulatory bodies like the SEC. A single compliance violation could cost the firm tens of thousands of dollars in fines, not to mention the reputational damage. For example, a recent cybersecurity breach at a similar-sized firm resulted in a $50,000 fine and mandated independent audits for two years.

Furthermore, advisors struggling with the Series 65 exam often experienced decreased confidence and productivity. An advisor spending excessive time studying for retakes might miss opportunities to engage with clients and prospect for new business. We estimate that an advisor taking two weeks to study for a retake could lose up to $10,000 in potential commission revenue, based on an average commission rate of 1% on new assets acquired. This impacted the firm’s overall growth and profitability. Patricia Brennan needed a comprehensive solution to improve pass rates, reduce compliance risks, and boost advisor confidence and productivity.

The Approach

Golden Door Asset's approach was built upon a foundation of personalized learning and adaptive technology, addressing the specific weaknesses identified in Legacy Bridge Advisors' existing training program. We began with a comprehensive needs assessment, analyzing past exam performance data, conducting interviews with advisors, and reviewing the firm's compliance policies and procedures. This revealed that advisors struggled most with topics related to investment strategies, ethics, and state securities laws.

Based on this assessment, we developed a customized training curriculum that focused on these key areas. The curriculum incorporated a variety of learning modalities, including interactive videos, quizzes, case studies, and practice exams. We also introduced a gamified element to make the learning process more engaging and enjoyable.

A core element of our approach was the development of a practice exam platform that mimicked the format and difficulty of the actual Series 65 exam. This platform utilized adaptive learning algorithms to personalize the learning experience for each advisor. The algorithms analyzed the advisor's performance on practice questions and identified areas where they needed additional support. The platform then automatically adjusted the difficulty level of the questions and provided targeted feedback to help the advisor improve. We worked with experienced compliance attorneys to ensure that the practice questions accurately reflected the content and format of the real exam, staying current with recent regulatory changes like the SEC's Regulation Best Interest (Reg BI) requirements.

The strategic decision framework we employed focused on three key pillars:

1. Targeted Content: Concentrating on areas of weakness identified through data analysis.
2. Personalized Learning: Using adaptive technology to tailor the learning experience to each advisor's needs.
3. Realistic Simulation: Creating a practice exam environment that accurately reflects the real exam.

This multi-faceted approach aimed to not only increase pass rates but also to foster a deeper understanding of regulatory requirements among Legacy Bridge Advisors' advisors, leading to improved compliance practices across the firm.

Technical Implementation

The customized training program was delivered through a custom-built Learning Management System (LMS) platform. The LMS was designed with a user-friendly interface and incorporated several key features:

• Adaptive Learning Modules: Each module covered a specific regulatory topic and included interactive videos, quizzes, and case studies. The difficulty level of the quizzes adjusted automatically based on the advisor's performance. For example, if an advisor consistently answered questions correctly on the topic of "Modern Portfolio Theory," the system would present them with more challenging scenarios involving real-world asset allocation decisions and tax implications.

• Practice Exam Platform: This platform featured a database of over 1,000 practice questions, each tagged with relevant regulatory topics and difficulty levels. The platform used an algorithm based on the Item Response Theory (IRT) to estimate the advisor's proficiency level and select questions accordingly. The IRT model factored in the advisor's past performance, the difficulty of the questions, and the discrimination parameter (how well the question differentiates between high- and low-performing individuals).

• Real-Time Performance Tracking: The LMS tracked the advisor's progress through the training program and provided detailed reports on their performance. These reports included information on their overall score, their performance on specific topics, and their areas of strength and weakness. Patricia Brennan could access aggregated data to monitor overall firm performance and identify any systemic issues.

• Content Management System (CMS): Allowed easy updates to the content as new regulations and industry best practices emerged. This CMS was built to allow for dynamic content updates.

We integrated the LMS with Legacy Bridge Advisors' existing HR system to automatically enroll new advisors in the training program and track their completion status. All data was encrypted both in transit and at rest, adhering to strict security protocols and compliance with privacy regulations like the California Consumer Privacy Act (CCPA). The platform was hosted on a secure cloud infrastructure with redundant backups to ensure data availability and prevent data loss.

Calculations used included:

• Proficiency Score: Calculated using the IRT model, ranging from 0 to 100, indicating the advisor's mastery of the material.
• Pass Rate Prediction: Based on historical data and the advisor's proficiency score, the system estimated their likelihood of passing the actual Series 65 exam.
• Risk Score: Calculated based on advisor performance with a higher score indicating a greater possibility of a compliance breach.

Results & ROI

The implementation of Golden Door Asset's customized training program and practice exam platform yielded significant results for Legacy Bridge Advisors:

• Series 65 Pass Rate: Achieved a 95% pass rate on the Series 65 exam, compared to a previous average of 75%. This represents a 20-percentage point increase, exceeding the industry average pass rate of 75%.
• Reduced Exam Retake Costs: The improved pass rate significantly reduced the number of advisors needing to retake the exam, saving the firm approximately $1,295 annually in registration fees (based on the previous failure rate and cost per retake).
• Increased Advisor Confidence: Advisor surveys revealed a significant increase in confidence levels regarding their understanding of regulatory requirements. Before the program, only 40% of advisors felt "very confident" about the Series 65 material; after the program, that number jumped to 85%.
• Reduced Compliance Risk: The enhanced understanding of regulatory requirements led to a measurable reduction in compliance errors. Based on internal audits, the number of compliance-related issues identified per quarter decreased by 30%.
• Improved Advisor Productivity: Advisors spent less time studying for retakes and more time focusing on client service and business development. We estimate this led to an increase in new asset acquisition of approximately $500,000 per advisor, based on an average commission rate of 1% and anecdotal evidence from the advisors themselves. This increase resulted in an additional $5,000 in revenue per advisor.
• Time Savings for Compliance Officer: Patricia Brennan reported a 25% reduction in time spent addressing compliance issues, allowing her to focus on more strategic initiatives.

The return on investment (ROI) was substantial. The investment in the program paid for itself within the first year, considering the reduced exam costs, reduced compliance risk, and increased advisor productivity.

Key Takeaways

1. Personalization is Key: Generic training programs are often ineffective. Tailoring the content and delivery method to the specific needs and weaknesses of your advisors can significantly improve learning outcomes.
2. Data-Driven Approach: Tracking advisor performance and using data to identify areas of weakness is crucial for continuous improvement. Use a Learning Management System to monitor and refine your training program.
3. Realistic Simulation: Practice exams that closely mimic the format and difficulty of the actual exam are essential for building confidence and preparing advisors for success.
4. Compliance as an Investment: Viewing compliance as an investment, rather than a cost, can lead to significant returns in the form of reduced risk, improved advisor performance, and increased client satisfaction.
5. Leverage Technology: Using technology for adaptive learning, performance tracking, and content delivery can streamline the training process and improve its effectiveness.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors improve regulatory compliance, increase efficiency, and enhance client outcomes. Visit our tools to see how we can help your practice.