Transforming Compliance and Fulfillment Communications


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Variable annuity carriers can significantly lower costs of fulfillment while staying compliant and improving their customers' experience through customization.

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Transforming Compliance and Fulfillment Communications

  1. 1. Industry Insights into Re-Engineering Your Traditional Compliance Fulfillment Approach for Cost Reduction and Greater Customer Benefits Transforming Compliance Communications from Challenge to Differentiator Managing Change and Complexity in a Dynamically Evolving Industry The variable annuity (VA) industry has always been one of the most dynamic in financial services, responding to changes in tax laws, an explosion of investment choices, innovative features and an ever-changing risk environment. Current approaches to VA compliance communications, however, can pose challenges for both the advisors distributing the product and the customers trying to better understand their investment purchase. Key customer benefits of the overall VA product can be lost in the deluge of complex compliance communications that customers must weed through, a large part of which relates to investments not even selected by the customer. Firms need to be mindful of an emerging investor base of “New Consumers” that research1 shows are defined more by shared values than by demographics. These 70 million new consumers value sustainability and targeted communications, and are already on the Internet. All of these challenges create a major opportunity for innovative carriers who re-think their compliance fulfillment to deliver a better customer and advisor experience, while achieving substantial cost savings. 1 BBMG study, Unleashed: How New Consumers Will Revolutionize Brands and Scale Sustainability (March 2011)
  2. 2. Options Available to VA Carriers for Regulatory Fulfillment The table below depicts three options available to carriers in meeting their regulatory compliance fulfillment needs: the traditional “Big Book” approach, the “Mini Catalog” approach, and newer “State-of-the-Art” solutions designed to reduce costs, improve the customer experience and help mitigate business risk associated with compliance communication obligations. The “Big Book” A single book is created with all of the required information for all investment options offered in the product. The more options, the greater the page count and print/ postage costs associated with delivery. Only available if the “Big Book” is comprised of individually filed prospectuses (i.e., not submitted as a single multi- fund filing on EDGAR). Big Book approach used for shareholder report mailings (semi-annual and annual reports). State of the Art Investor disclosure communications include only those personal holdings held by the recipient. Subsequent regulatory communications are only sent to those customers who need to receive the particular document (i.e., no irrelevant or redundant mailings). Can achieve substantial cost savings, as well as improved customer experience, by delivering these streamlined “plain English” documents in a portfolio-specific manner. Two options available: • Industry utility (as leveraged in mutual fund channel) wherein print costs of shareholder reports are transferred to fund partners who are typically obligated to deliver these documents. • Portfolio-specific printing leveraging policyholder data to digitally print on demand books that contain only individual investor holdings. The “Mini Catalog” Multiple smaller books are created grouping subsets of options based on usage statistics. Customers with two or three of the most popular options may be sent one small book. Others may receive multiple books. Not generally available due to limitations on mixing summary and statutory prospectuses. Mini Catalog approach used for shareholder report mailings (semi- annual and annual reports). Fulfillment Approach General Description Summary Prospectus Regulatory Mailings
  3. 3. One-time “blanket mailing” doesn’t account for prospectus updates and supplements (i.e., only captures one point in time). ”It’s the Devil that we know.” Traditional approach requires the least change. Every customer experiences massive over delivery – bulky impersonal communications, most of which are not representative of their individual investment holdings (i.e., more information than required). Costs can be unwieldy, particularly for products with many investment options. Available; however, historically low (single-digit) adoption by VA policyholders has made this fulfillment approach largely irrelevant to date. Ability to deliver portfolio- specific documents and the summary prospectus reduces costs of prospectus updates and/ or supplements. Also, the ability to track delivery history and monitor the latest SEC filings on a centralized database helps to assure the appropriate documents are delivered for each new transaction. Re-engineered approach could significantly reduce costs and offer fast ROI: A minimum of 20% sustainable long-term savings and payback in Year One. Also improves the customer experience and advisor productivity as summary prospectus becomes a sales/ marketing tool that presents streamlined information in “plain English”. Potentially improves compliance and retains client control. Achieving full benefits requires organizational commitment by the carrier and their fund partners to migrate to the new approach. This can impact many areas including Marketing, Procurement, Operations and Legal/Compliance. Available and more easily implemented when combined with an industry-compliant and ESIGN-compliant consent management approach, along with an awareness program. Industry utilities or “nextgen” solutions to help accelerate e-delivery rates leveraging brokerage consent databases are currently in development. One-time “blanket mailing” doesn’t account for prospectus updates and supplements (i.e., only captures one point in time). Less costly than the Big Book. Leverages offset print which historically has been perceived as the “most cost-efficient” process. Mini catalogs also are “one-time” events and can create a compliance risk and result in over delivery. Many customers still receive multiple mini catalogs, creating a customer experience that can be worse than a single Big Book. Cost savings are limited as well. Available; however, historically low (single-digit) adoption by VA policyholders has made this fulfillment approach largely irrelevant to date. Compliance Key Benefits Limitations E-Delivery
  4. 4. © 2013 Broadridge Financial Solutions, Inc., Broadridge, the Broadridge logo, and certain other marks are registered trademarks or service marks of Broadridge Financial Solutions, Inc. NewRiver is a part of Broadridge Financial Solutions, Inc. All rights reserved. 199_NR_22 Take a Leap Forward Leading carriers have already begun to re-think their approach to compliance fulfillment, moving from a traditional Big Book approach or an incrementally better Mini Catalog approach to a state-of-the-art technology-based approach that can have substantial benefits to the carrier. While implementation of these solutions takes an investment of both money and human resources, the savings can be so substantial that the conversion can pay for itself in as little as a year or less depending on the approach or partner you choose. Additionally, sustainable ongoing savings of 20%, or even more, is certainly attainable. And this is before you assign a value to the improved customer and advisor experience of eliminating the current tide of over delivery. When you consider enhancing your traditional compliance fulfillment approach with a more advanced platform, you will want to incorporate several factors in your analysis: • Strengths and limitations of your current approach to compliance communications • Available options • Potential phasing strategies • Adoption of the summary prospectus approach, including website maintenance • Expanding electronic distribution options and usage • Cost savings targets, now and in the future • Customer and advisor experience enhancements • Ability to migrate legacy systems and accommodate print, electronic and web outputs • Implementation timeframe and resource commitment • Leveraging a mature solution that incorporates client business rules • End-to-end reliability in regulatory compliance • Review of third-party data security, business continuity and disaster recovery plan • Confirm financial stability of third-party provider to ensure their longevity • The ability to track fulfillment expenses for chargeback opportunities • Maintaining an archival of individual delivery histories for reporting and auditing purposes For more information, call Broadridge today at +1 800 481 2331 or email About Broadridge Broadridge Financial Solutions, Inc. (NYSE:BR) is the leading provider of investor communications and technology-driven solutions for broker-dealers, banks, mutual funds and corporate issuers globally. Visit us: