Texting has become a common way to communicate in nearly every aspect of life. It’s no different for registered investment advisory (RIA) and financial advisory firms. Employees often find texting to be the fastest way to connect with clients, answer questions, or share updates. But while texting is quick and convenient, it can also open the door to risks such as data breaches, compliance violations, and regulatory fines.
Finding the right balance between staying connected and staying compliant is critical for RIAs and financial advisors.
The risks of unregulated texting in RIA firms
Texting might seem harmless, but without proper oversight and controls, it can expose your firm to:
Data security vulnerabilities
What happens if an employee’s phone is lost or stolen, and it contains sensitive client information? Or, what if an unsecured text message is intercepted? These scenarios can lead to serious data breaches, putting both your firm and clients at risk.
Legal and reputational risks
Text messages can be easily forwarded and shared, making it difficult to control the dissemination of information. This increases the risk of compliance violations, such as sharing confidential or misleading information with clients.
Additionally, if a client’s personal or financial information is compromised through texting, it can damage your firm’s reputation and lead to legal consequences.
Compliance violations and fines
The financial industry operates under strict recordkeeping requirements from regulatory bodies such as the Securities and Exchange Commission and the Financial Industry Regulatory Authority. Text messages are considered electronic communications and must be retained for compliance purposes. Failing to do so can result in regulatory fines and penalties.
Risk of using personal devices
The use of personal devices for business communication adds another layer of complexity. Monitoring, archiving, and retrieving text messages from employees’ personal phones can be difficult and time-consuming. It also blurs the line between personal and business communication, making it challenging to enforce compliance policies and procedures.
Best practices for secure and compliant texting in RIA firms
To effectively manage texting risks, your RIA or financial advisory firm should follow these best practices:
Create clear policies
Develop clear guidelines on when and how texting can be used. Make sure all employees understand and adhere to these rules to maintain compliance and professionalism.
Use approved platforms
Implement a company-approved texting platform for business communication. This allows for better control and monitoring of text messages, ensuring compliance with recordkeeping requirements.
Conduct employee training and ensure accountability
It’s one thing to have rules, and it’s another to ensure they’re followed. Regular training sessions can help employees understand the risks and how to stay compliant. Plus, keeping training up to date ensures you’re ready for new challenges as they arise.
Enable monitoring and archiving
Set your team up for success with tools that allow you to monitor and archive texts without crossing privacy lines. For example, Microsoft solutions make it simple to stay on top of regulatory requirements.
Explore alternatives to texting
Sometimes, texting isn’t the best option. Encourage your team to use secure collaboration tools such as Microsoft Teams or encrypted client portals. They’re just as fast, but far more secure.
How MSPs can help manage texting risks for RIA firms
Managed IT services providers (MSPs), such as RIA WorkSpace, are experts in implementing and maintaining secure technology solutions for financial firms. MSPs can help your RIA or financial advisory firm manage texting risks by:
- Assessing your current texting policies and identifying potential vulnerabilities
- Implementing secure platforms and tools for compliant communication
- Providing training and support to ensure compliance with regulatory requirements
- Helping monitor and archive text messages for recordkeeping purposes
By partnering with an MSP, you can ensure that your firm stays connected with clients while also mitigating potential risks associated with texting.
| Related reading: Why an assigned IT team is key to your RIA’s success |
Texting can be a great tool for staying connected with your clients, but it’s not without its risks. By using secure platforms, setting clear policies, and leaning on experts when needed, you can stay compliant and maintain the trust of your clients. So, before you hit send on that next text, make sure you’re taking the necessary steps to protect yourself and your clients.
CalI RIA WorkSpace today to learn more about how we can help secure your business communications and overall operations.