Why Broker-Dealers Are Outsourcing Operational Compliance in 2025

Broker-dealers are increasingly outsourcing their operational compliance needs. This strategic shift is driven by the growing complexity of regulatory requirements, the need for efficiency, and the desire to mitigate the costly mistakes associated with compliance failures.

Regulatory complexity

Agencies like the SEC, FINRA, and FinCEN are constantly introducing new and more intricate rules and amendments. Whether they come in the form of cautionary guidance, strategic recommendations, no action letters, or sweeping regulatory changes that can alter a firm's operations; reports like these demand specialized expertise and focused attention to help firms comply and adapt their business processes as needed.

Cost Efficiency and Resource Allocation

Maintaining an in-house compliance department requires significant investment in personnel, training, and technology. Many firms choose to outsource these functions, as set up costs can soar well into six figures. Outsourcing allows broker-dealers to still access professional services starting around $10,000 to $50,000. The lower cost and reduced stress make it an attractive model for traditional firms looking to expand without high upfront costs and time delays.

Risk Mitigation and Enhanced Oversight

Non-compliance can lead to severe monetary penalties, reputational damage, and operational disruptions. In Dec, 2023, FINRA slapped a $24M fine on Bank of America Securities for over 700 cases of spoofing. That same year, FINRA also fined Merrill Lunch $6M for failing to establish effective thresholds to report suspicious activities. And in 2024, Robinhood's many  violations totaled nearly $50M. By outsourcing compliance, broker-dealers can leverage the expertise of specialized firms to implement risk management strategies and compliance technologies, helping to ensure an adherence to rules and regulations and the prevention of hefty fines. 

Scalability and Operational Flexibility

As broker-dealer firms expand in size and face changes to the industry, their compliance needs evolve as well. Outsourcing operational processes allows for the ability to scale compliance functions in response to these changes without the need for significant internal restructuring. This adaptability is crucial in an ever-changing regulatory environment.

The growing trend of outsourcing operational compliance among broker-dealers reflects a strategic opportunity. Faced with an increasingly complex regulatory landscape, firms are turning to specialized compliance providers to ensure accuracy and efficiency. Outsourcing allows broker-dealers to access expert knowledge, advanced technologies, and scalable solutions without the burden of maintaining large in-house teams. More importantly, it enables firms to mitigate risk, respond swiftly to regulatory shifts, and refocus internal resources on growth and innovation. 

As the regulatory bar continues to shift, outsourcing is becoming a competitive imperative for firms that want to stay agile, compliant, and ahead of the curve. More firms are turning to third parties to handle critical functions such as:

• Compliance and regulatory filings

• Anti-money laundering (AML)

• Know Your Customer (KYC) verifications

• Offering due diligence

• Trade surveillance

• Email and electronic communications archiving

• Legal and licensing filings

• Cybersecurity and data protection

• Books and records management

• Training and continuing education

• Human resources and background checks

• Financial reporting

• Internal audits and risk assessments

• Business continuity planning

• Client disclosures and document delivery

• Review of communications with the public

By strategically outsourcing non-core but essential responsibilities, firms can reduce operational burden, enhance regulatory readiness, and focus more time and resources on growth and client service.

Sources:

• FINRA's 2025 Regulatory Oversight Report: finra.org

• Study on cost savings from outsourcing compliance: the-credence.com

• Overview of outsourcing compliance benefits: fnex.com

AdvisorHub article on FINRA's focus areas: advisorhub.com