Murphy's Law, Compliance and Risk

Murphy's Law states: Nothing is as easy as it looks, everything takes longer than you expect, if anything can go wrong it will go wrong... and at the worst possible moment. 

Having experienced Murphy’s Law first hand with clients as an advisor and in my Chief Operating Officer (COO) roles in various sized wealth management firms, I found that rule of life woven into every element of an advisory role and responsibility.  I might also share that over my years, when I topically broached compliance, it led to an immediate “eyes glazed over look” from advisors.  Risk was much less so considered boring, but when bought up against the other tensions of return, taxes, and expenses, it seemingly took a backseat as well.   Except, when everyone’s clients had their eyes set upon risk in volatile periods.   Yet, both compliance and risk are inexorably linked (like Murphy’s Law) and critical to ensuring firms deliver a consistent, objective, and impactful client service experience.  

As a high-level compliance example, an implementable process should be established in designing, implementing, and monitoring a risk-aligned client portfolio, in as personalized a manner as possible.   Yet that process must be something that is not so arduous, it impedes a proper client experience with their advisor.  The approach is usually collaboratively developed with the executives/partners, advisors, investment committee/portfolio managers, financial planning side, and compliance sides of the business.    That’s a lot of moving parts to discuss, align and build resulting in a harmonious experience for all involved.   Especially while protecting the clients’ best interests.   After saying that, I still have found the time, resources, and budget dedicated to compliance with many firms to be less than impressive.   Many tense conversations on this topic ended with many members expressing “we’ve never had a problem from a compliance standpoint with SEC reviews or audits.”   Although the sought-after SEC goal of a firm review is at least every 5 years, many do not experience that frequency. 

The advisors I have known truly feel they are the least likely to have a compliance issue and that may be the case.  However, while I was in the role of COO, I would simply quote Murphy’s Law and move forward to ensure we were covered with anticipation of the plethora of risk permutations.   It was during this process, I found my own risk conversations to have noticeable gaps in communication between what advisors, the investment management team, portfolio managers, and planners sought to achieve.    

As a result, I set about to change that conversation and to tighten up the conversations surrounding risk, compliance and the clients we sought to satisfy.    Like clients, I believe advisors need to also sleep well at night!  

I invite you to check Fabric Risk out and give us your feedback on whether we are closer to helping advisors with the immutable and undeniable Murphy’s Law.