Less than a fifth of financial services firm spend more than what is recommended on compliance-related functions and procedures, while many others cannot identify how much they devote to this area at all, a poll of compliance executives showed.

Some of the largest banks in the world have been fined for crimes such as money-laundering and inter-bank lending offenses in recent months and years, while high-profile data breaches have also dented consumer confidence.

It is therefore no surprise that, according to the latest C-Suite Survey by Cipperman Compliance Services, more and more financial services firms see compliance as a core function of their business: 81 per cent of 180 respondents said they are concerned or very concerned by the SEC’s practice of naming and prosecuting individuals, and 88 per cent reported that they have conducted a compliance review in the last year, up from 67 per cent in 2014.

But even as they increasingly report having dedicated compliance staff, for example, they have yet to fully devote enough resources to their programs, Cipperman said.

Just 18 per cent of those polled allocate over the industry benchmark of 5 per cent of revenues to such activities while 53 per cent said they assign between 0 and 5 per cent of their total revenues to this area. Nearly a quarter (23 per cent) who work at a wealth manager said they allocate less than 1 per cent of their revenues on compliance while over a third (38 per cent) cited between 1 and 5 per cent, and 8 per cent between 5 and 10 per cent. (Worth noting is that, of course, spending requirements will depend on an individual firm’s circumstances and the services that they offer.)

Perhaps more telling, though, a significant portion of all respondents said they were unaware of how much they spend on compliance altogether. This was the case among 31 per cent of wealth managers, 29 per cent of asset managers, 35 per cent of broker-dealers and 14 per cent of alternative managers.

(Over half of the respondents (53 per cent) described their firm as asset managers, followed by alternative investment managers (15 per cent), broker-dealers (13 per cent), wealth managers (8 per cent), or “other” (11 per cent).)

“A lot of headaches in compliance apply across the board. Especially with smaller firms, you have individuals wearing multiple hats, so the question becomes 'how do you properly allocate your time to compliance versus other tasks’?” Jay Haas, a director at Cipperman Compliance Services, told Family Wealth Report. “There are some issues that regulators are focusing more on. Lately, the buzzword and hot topic is cybersecurity. However, there hasn't been a whole lot of clarity there – regulators have mostly just made recommendations on cybersecurity compliance.”

Meanwhile, consumers are spending more time sussing out potential past violations and trying to determine quality, with 70 per cent of all respondents reporting that prospective clients have asked specific questions about their firm's compliance policies, or have asked to speak directly to compliance staff about this. Nearly a third of wealth managers reported this to be true while 61 per cent said it is not something they have observed, and 8 per cent were unsure.

“The regulators have been touting the broker-check functionality on FINRA’s website,” Haas told this publication. “They are encouraging investors to do their homework and see if there have been any past complaints on either the firm or the individual with whom they are doing business.”

“These figures show, as they did last year, that it is much easier to talk the compliance talk than walk the walk,” added managing director Jason Ewasko. “Firms should spend a minimum of 5 per cent of revenues or two basis points of assets under management on compliance in order to have an effective program.”

Meanwhile, the findings point to a growing trend around outsourcing, with over half (57 per cent) of all respondents saying that they outsource some or all of their compliance functions - up from 24 per cent in 2014. Leading the trend of firms embracing outsourcing are broker-dealers, at 65 per cent, and alternative managers, at 68 per cent. Over two-thirds (69 per cent) of wealth managers said they outsource some of these functions.

Speaking about the family office sector, Haas pointed out that family offices carry out a wide array of tasks, from bill paying to taxes, but they are, of course, all unique.

“Compliance is really important to family offices because it deals with the reputation of the family,” Haas said. “The whole reason the office is set up is to avoid those worries. If an office makes a bad trade, that’s just a mistake. But if you stumble on compliance you can lose a good reputation. Offices now need to hire compliance expertise the same way they would a law or accounting firm.”