Business continuity planning is top compliance concern for advisory firms

As investment advisory firms cope with disruptions caused by the coronavirus pandemic, business continuity plans have become their top compliance concern, according to a report released Friday.

Nearly two-thirds of firms cited maintaining business operations during the COVID-19 outbreak as their biggest worry, but they also expressed confidence that they are meeting the challenge, the 2020 Investment Management Compliance Testing Survey found.

Only 12% of the firms reported experiencing a “material impact” due to the pandemic even though 81% said their entire staff was working from home.

The results were based on responses from compliance officers at 384 investment advisory firms surveyed between April 20 and May 31. The survey was sponsored by the Investment Adviser Association, ACA Compliance Group and BrightSphere Investment Group.

The fact that advisory firms are taking the pandemic in stride didn’t surprise Karen Barr, chief executive of the Investment Adviser Association.

“That finding is consistent with what we at the IAA have heard from our member firms repeatedly since late March,” Barr said in a statement. “Due to significant testing and advance preparation, most firms were well prepared to operate remotely and serve their clients. And that underscores the most important takeaway from this year’s survey – that firms continue to strengthen their compliance programs.”

The survey showed that 53% of firms included responding to contagious diseases as part of their business continuity plans, up from 37% in 2019. But 96% of BCPs that didn’t cover pandemics were still found to be effective.

Business continuity was the top compliance concern for 64% of firms surveyed, overtaking cybersecurity, cited by 57%, which came in second. Cybersecurity had held the top spot in the compliance hot topic list for the past six years.

Rounding out the top compliance concerns were advertising/marketing (25%), conflicts of interest (21%) and environmental, social, governance and sustainability (14%).

Among survey participants, 43% had regulatory assets under management of between $1 billion and $10 billion. Of the remaining respondents, about half managed $10 billion or more in AUM, while half managed less than $1 billion. Nearly half of the firms had between 11 and 50 employees.

[More: How contagious illness planning differs from business continuity planning]

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