Lifting the Burden

It is one of the more unique business models: A two-person start-up that is a subsidiary inside one of Cincinnati’s oldest and most prestigious general practice law firms, Graydon Head. 

Graydon Compliance Solutions, LLC is the start-up boutique designed to serve a specific market with a needed service providing compliance services for wealth managers.

"We do one thing – we will be the chief compliance officer for registered investment advisors," says Kevin Woodard co-founder of Graydon CS. "We assume the regulatory responsibility to have a compliance program in place, to execute it and to do everything required of a chief compliance officer." 

Woodard and co-founder Matt Swendiman have served as chief compliance officers for a variety of investment advisors and

broker-dealers. 

With that background, it seemed a natural fit for Graydon Head to design a structure for the two to do what they do best – handle compliance policies and procedures. Both men are also attorneys, although Graydon CS does not itself provide legal representation or advice.

"In law firms, there are not many folks who actually have the experience of being a compliance officer," says Swendiman. "They view things as strictly providing legal services. It doesn’t always give them a good view of what truly are the risks. We understand those risks. We can mitigate them and deliver the services in a way that is financially efficient."  

From their experience, Woodard and Swendiman know that compliance officer can be a thankless job, especially in a smaller firm. They feel an outsourced compliance service makes sense for many investment firms. 

"Sometimes the compliance officer is the person who lost a coin flip," Woodard says with a laugh. "But somebody has to do it, even though it’s burdensome and difficult. We can step in and allow an investment firm to concentrate on serving their clients and growing their business." 

Potential clients vary widely, but Graydon CS is generally targeting SEC-registered advisors with $100 million or more under management. It’s a service attractive to many wealth managers in this region, since few local firms offer an outsourced compliance officer. Graydon CS has clients not only in Greater Cincinnati, but throughout the country, including New York, Arizona, Minnesota and Florida. 

Swendiman says it makes sense for Graydon Head to offer the service in a subsidiary firm, since it allows them to break the traditional legal services mold. For example, Graydon CS is not a legal advisor to financial managers. "We aren’t their lawyer. We are their chief compliance officer." But if the financial managers needs legal advice, they can separately retain Graydon Head to provide that advice.

The specialized service allows Graydon CS to jump on the trend away from the billable hour fee structure. "We charge a flat annual fee for our outsourced compliance service," Swendiman says. "Kevin and I used to be the ones who had to buy legal help and there is nothing worse than calling a law firm and discussing the hourly rates. We can create a project-based fee so advisors can budget to it." 

And clients are finding Cincinnati-based prices can be friendlier than if the same quality is contracted from New York, Boston or Chicago. "We can show them a list of our New York-based clients who would rather pay us instead of the New York price points,"

says Swendiman. 

As for the larger policy issues of increased government regulation of the financial services industry being debated, Swendiman says in most cases it comes down to a necessary response because of the few bad apples. 

"Is there a lot of regulation? Yes. Does there need to be? Yes. There was a guy named Bernie Madoff … and that led to a whole series of regulations regarding custody of assets. Even in Cincinnati you have had Ponzi schemes and other issues. We believe by bringing in a third party resource like Graydon CS, an advisor shows a commitment to compliance and regulatory procedures." 

In addition, Woodard says people should never forget the main reason for a robust compliance and regulatory structure. "It is to ensure the fiduciary relationship with the client. Disclosure information is all about ethics and putting the interest of your client before your own firm. That is the underpinning of the whole regulatory regime." 

Woodard and Swendiman have been planning the outsourced compliance team for some time and credit their parent firm for committing to this unique model. It has allowed the two men to practically start a new business from the ground floor, yet in an area where they have extensive experience with contacts across the country. 

"Once we get the opportunity to share our story, we’ve had a good level of success," Woodard says. "There aren’t a lot of firms offering the outsource solution. Most firms would advise someone on a manager’s staff, but ultimately the responsibility and the risk remains with the financial advisor. Here we are actually stepping into the shoes and taking on that role and lift some of that burden as chief

compliance officer." 

Graydon Compliance Solutions, LLC (Graydon CS) provides compliance services for investment managers. Services include investment manager creation and registration, ongoing and issue specific consulting and personnel of Graydon CS serving as the Chief Compliance Officer (CCO) for your firm. You can reach Graydon CS at 513.629.2750 or visit their website at www.graydoncs.com.