To meet financial advisers' demands to communicate with clients via text message, digital platforms for compliant texting are increasingly common across the financial advice industry.
But archiving is only half the battle, said Chris Fernandes, head of legal and compliance at
Hearsay Systems. Advisers can still send messages that run afoul of regulations, forcing compliance teams to react after the fact.
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Mr. Fernandes hopes the latest feature from Hearsay, which makes compliant digital communications systems for the financial services industry, can help firms be more proactive about texting compliance. Hearsay Relate, the company's texting and mobile calling app, can now automatically detect when an adviser types out a word or phrase forbidden by the firm or industry regulations.
Hearsay can categorically block the message, preventing an adviser from willingly or unwillingly sending a noncompliant text, or it can automatically flag the text for compliance teams to review.
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For example, advisers can't ask for any personally identifiable information, such as account or
Social Security numbers, Mr. Fernandes said. Nor can they make direct solicitations that don't comply with advertising regulations.
"We were having [firms] who were particularly concerned with ensuring advisers were using texting channels for relationship management and not for reasons that would run afoul of consumer protection issues," Mr. Fernandes said when asked why Hearsay developed this new feature. "It's technology assistance in addition to standard policies and training."
Text conversations are fundamentally different than other channels, such as email, phone calls or in-person meetings, and most firms' solutions are inadequate for reviewing abbreviations and "text-speak," Mr. Fernandes added.
Hearsay's program operates using a lexicon library aligned with industry and federally mandated regulations, as well as any custom language a firm would like added. This includes rules from the
Financial Industry Regulatory Authority Inc., the Securities and Exchange Commission, the Federal Communications Commission and the Federal Trade Commission.
The list will continually be updated based on decisions made by compliance officers, helping the program to improve over time.
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Mr. Fernandes said the automation reduces false alerts and helps compliance teams focus on highest-risk activities, saving hours of labor by automating previously manual tasks.
