Comprehensive consulting for investment advisors, broker-dealers and private funds.

Getting the Right People in the Roles

Waterfall Strategies was two years old and growing fast. They’d left a wirehouse and brought a loyal client base and significant assets to the new entity. They also recognized they had a whole new set of responsibilities in terms of running the business as a business. A year earlier they’d tapped one of their younger advisors to serve as the CCO. Dave had a good compliance instinct and as an advisor he also understood the firm’s investment process and operational workflow. He was happy to take on the additional responsibilities and the four owners were glad to give the job to somebody who would take it seriously and keep them all out of trouble.

Then Waterfall had their first SEC exam. While the SEC was relatively kind to them because this was the first time they’d been examined and there wasn’t any actual client harm, the results of the exam letter could be summarized as, “You have good policies but the implementation sucks.” The SEC made it clear they needed to improve things and do it quickly. They also made it clear the kindness wouldn’t be repeated if the same findings came up on the next exam.

Waterfall reached out to us for help. We started with our standard survey process, where we gather information on how the company functions broadly, what seems to be working well, what isn’t working, and other questions that get at company culture, not just compliance.

What we learned was that Dave as the CCO had no actual authority. Ownership and management responsibility rested with the four owners. Dave’s attempts to change workflow, disclosures, or policies kept hitting a wall because he needed the owners to agree with him. While he had the title of CCO, in practice he was a compliance administrator, and not a very efficient one.

As part of our initial assessment, we helped the management team gain insight into what was happening. They were able to identify that one of the four owners, Angela, would be a good CCO and that she had the authority to make things happen. She was then able to use Dave’s skills, and our consulting support, to get things done. While it added some new duties to Angela’s plate, the role was well-integrated with her other executive duties. The end result actually meant less work overall because the owners weren’t constantly revisiting the same questions and didn’t have to keep focusing on compliance issues as a group.


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