Is your fintech startup considering outsourced FINOP services? Have you grown recently and need help with finance optimization, compliance, and risk management?
Our comprehensive Guide, answers all your questions:
- What does a FINOP do?
- What is a FINOP license?
- What is the role of a FINOP?
- What are the benefits of using FINOP services?
- What are the benefits of outsourced FINOP services?
- How much does it cost to outsource FINOP?
- How to find people with series 27/28 licenses?
You’ll have all the required information to determine whether FINOP outsourcing is right for your financial services company.
As an outsourced FINOP service provider since 2013, we’ve been working with fintechs and we’re now sharing our practical knowledge in this Guide.
Subject-matter experts with decades of experience wrote this analysis, not freelance copywriters, third-party agencies, or AI-based tools. We are global outsourced FINOP and regulatory compliance experts.
If we do not cover all your questions here, email us at email@example.com, and we will gladly give you a free consultation.
What is a FINOP (Financial & Operations Principal)?
A FINOP is a mandatory role for a broker-dealer under FINRA Rule 1200 Series (formerly NASD Rule 1022). The FINOP is personally responsible for maintaining financial records, ensuring the accuracy of financial statements, adhering to net capital rules, and submitting all financial regulatory reports. To qualify as a FINOP, individuals must pass the Series 27 or Series 28 examination.
What does a FINOP do?
FINOP plays a crucial role within broker-dealers, providing expertise in both business operations and regulatory compliance. Here are examples of what their roles & responsibilities consist of:
- Financial Reporting and Analysis
- Regulatory Compliance
- Risk Management
- Capital Adequacy
- Operational Efficiency
- Liaison with Regulators
Not all outsourced FINOP consultants perform all these services. InnReg, for example, offers an all-inclusive outsourced FINOP service package tailored to each client as needed. Let’s examine what each responsibility entails and how it can benefit your fintech.
Financial Reporting and Analysis
Unless you have dedicated accountants and other financial personnel, outsourced FINOPs can take on preparing and analyzing financial reports. This includes:
- Balance sheets
- Income statements
- Cash flow statements, and
- Other financial documents
Financial reporting helps startups understand their financial position, profitability, and cash flow situation, which are crucial for decision-making and strategic planning.
FINOPs help mitigate regulatory risk associated with financial operations rules, such as those set by regulatory bodies like the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC).
Maintaining adequate net capital is a regulatory requirement for broker-dealers and other financial institutions. Outsourced FINOPs monitor the company's net capital to verify that it meets the minimum requirements set by regulatory bodies.
An outsourced FINOP’s job is to streamline financial operations and improve efficiency. This could involve optimizing financial processes, implementing new financial systems, or leveraging financial technology to automate routine tasks.
Liaison with Regulators
FINOPs often act as the primary point of contact between the fintech startup and regulatory bodies. These interactions include, but are not limited to:
- Handling regulatory inquiries and examinations
- Submitting required reports and filings, and
- Keeping the company updated on any changes in financial regulations.
By performing these roles, FINOPs help fintech founders navigate the complex world of financial operations and regulatory compliance, allowing them to focus their attention and resources on their core business activities and growth objectives.
What is a FINOP license?
FINOP license (Financial and Operations Principal) is a certification administered by the Financial Industry Regulatory Authority (FINRA) in the United States. It is also referred to as the Series 27 license.
The FINOP license exam covers a wide range of topics, such as:
- Financial Reporting
- Net Capital Requirements
- Customer Protection
- Regulatory Framework
- Operations Management
By passing the Series 27 exam, professionals demonstrate a comprehensive understanding of the financial operations and regulatory requirements for broker-dealers and other fintechs.
FINOP License: The Series 27 Exam Key Topics
|FINOP License Topics||Required Knowledge and Skills by Topic|
|Financial Reporting||Includes the preparation and maintenance of financial reports, as well as the understanding of various accounting principles and procedures.|
|Net Capital Requirements||The exam tests knowledge of the minimum net capital requirements for broker-dealers and the methods for calculating net capital.|
|Customer Protection||Involves understanding the rules and regulations designed to protect customers, including the handling of customer accounts and funds.|
|Regulatory Framework||The exam covers the regulatory framework for broker-dealers, including the rules and regulations set by FINRA, the SEC, and other regulatory bodies.|
|Operations Management||Ensures knowledge of operational procedures, risk management, and the use of technology in financial operations.|
In order to receive a FINOP license, the candidate must have proven that they possess the knowledge and skills necessary to manage the financial operations of a fintech startup and ensure its compliance with all relevant regulations.
Furthermore, maintaining the Series 27 license requires ongoing education and adherence to FINRA's standards of professional conduct. This ensures that FINOPs stay up-to-date with the latest developments in financial operations and regulatory compliance, enabling them to provide the best possible service to fintechs.
What is the role of a FINOP?
The FINOP (Financial and Operations Principal) is a vital, mandatory position for broker-dealers, responsible for maintaining net capital, financial reports, regulatory compliance, risk management, and regulatory inquiries. They ensure the timely submission of reports, monitor financial regulations, and update the company on changes. Their role ensures smooth operations and adherence to financial regulations within the organization.
By performing these roles, FINOPs enable fintech broker-dealers to navigate the complex world of financial operations and regulatory compliance, allowing them to focus on their core business activities and growth objectives.
Series 27 Licensed FINOP, a.k.a. Series 27 Principal Outsourcing, or Series 27 Licensed FINOP Outsourcing
The Series 27 and Series 28 licenses are administered by the Financial Industry Regulatory Authority (FINRA) and designed for Financial and Operations Principals (FINOPs). However, they apply to different types of broker-dealers and have different exam content and requirements.
The Series 27 license, also known as the Financial and Operations Principal license, is designed for FINOPs of full-service broker-dealers. These are firms that conduct a broad range of activities, such as:
- Dealing in proprietary securities
- Operating under a carrying model, such as omnibus or self-clearing.
Series 28 Licensed FINOP
The Series 28 license, Introducing Broker Dealer Financial and Operations Principal license, is designed for FINOPs of the Introducing Broker-Dealers. These firms can accept securities orders but do not carry customer accounts or hold customer funds and securities.
Difference Between Series 27 and 28
Firms with a net capital requirement of $50,000 or less can choose Series 28 or Series 27 licensed FINOP. Broker-dealers with $100,000 or more must have a Series 27 FINOP.
The Series 28 exam is less comprehensive than the Series 27, reflecting a more limited scope of activities conducted by introducing broker-dealers.
The Choice Between Series 27 and 28
The choice between the Series 27 and Series 28 licenses depends on the nature of the fintech company's business.
|Series 27||Series 28|
|If the fintech company is an omnibus or self-clearing broker-dealer, a FINOP with a Series 27 license is more suitable due to their broader knowledge and expertise.||If the fintech company is an introducing broker-dealer, a FINOP with a Series 28 license may be sufficient.|
However, note that regardless of the license, a FINOP's ability to service a broker-dealer also depends on their experience, skills, and understanding of the specific needs and challenges of the fintech sector.
Does a FINOP Have a Fiduciary Duty to a Broker-Dealer?
Yes, FINOP has a fiduciary duty to a broker-dealer and is accountable to its management and the Board.
What Are the Benefits of Using Outsourced FINOP Services?
Essentially, FINOPs free up time and resources that fintech broker-dealer founders can invest in product development, market research, customer acquisition, and other core business activities.
These are the practical benefits of using FINOP services:
- Streamlining efficient financial operations
- Mitigating regulatory risk
- Assessing and managing risk
- Optimizing financial management
- Designing and implementing processes and systems, including:
- Managing cash flow
- Maintaining financial records
- Preparing financial reports and analyses
These tasks are often complex, require special expertise and experience, and are very time-consuming. Financial and Operations Principals (FINOPs) take care of these tasks and play a crucial role in fintech companies.
Outsourced FINOP Services
Hiring outsourced FINOP services can provide fintech companies with the cost-effective support they need to manage their financial operations and regulatory compliance effectively, while allowing them to focus on their core business activities, growth, and other critical and strategic goals.
Outsourced FinOp Responsibilities
The Financial and Operations Principal (FINOP) plays a critical role in the broker-dealer’s financial reporting, aligning financial operations and regulatory compliance with the company’s broader business objectives. Outsourced FINOP responsibilities include but are not limited to preparing and analyzing financial reports, assessing and managing financial and operational risks, and ensuring regulatory compliance.
At the heart of a fintech's operations, when needed, an outsourced FINOP could be responsible for managing the company’s financial health. This involves preparing, maintaining, and analyzing financial reports, which provide valuable insights into the company's financial position and performance. These insights inform strategic decision-making, helping the company achieve its growth objectives and maintain financial stability.
In addition, an outsourced FINOP plays a crucial role in risk management. By identifying, assessing, and managing financial and operational risks, they help the company navigate uncertainties of the fintech sector and ensure operational continuity. This is particularly important for fintech companies, which often operate in a high-risk, high-reward environment.
Regulatory compliance is another key responsibility of an outsourced FINOP. In the heavily regulated fintech sector, non-compliance can result in hefty fines, reputational damage, and even the loss of the company's license to operate. A FINOP mitigates the risk of non-compliance with all relevant financial and security regulations and helps the company remain current with any regulation changes, thereby helping to adapt operations and strategies accordingly.
What Are the Benefits of Outsourced FINOP Services?
Our clients experienced the following top benefits when hiring our Outsourced FINOP Services:
|Outsourced FINOP Services Benefit||Value to Fintech Client|
|Expertise and Experience||The right outsourced FINOPs bring a wealth of knowledge and experience in financial operations and regulatory compliance. This expertise is particularly beneficial for fintech startups without in-house financial and regulatory expertise.|
|Cost-Efficiency||Hiring a quality candidate for a full-time in-house FINOP role can be expensive, especially for smaller fintech companies or startups. Outsourcing is a more cost-effective solution, as it does not have the overhead costs and hiring expenses of a full-time employee.|
|Right-Sized Operations||Outsourced FINOP services can easily scale to meet changing needs of a fast-growing fintech. The support you need at a later stage of the company's journey will be more complex and require different expertise than on launch.
An outsourced FINOP team’s broad expertise and experience can meet your present and future needs.
Frequently Asked Questions about Outsourced FINOP
1. Why Hire an Outsourced FINOP?
The four main reasons your fintech should hire an outsourced FINOP include team expertise, experience, cost, and scalability.
|Team Expertise||It’s not easy to find properly licensed, inexpensive, yet strong FINOP candidates ready to quit their jobs for a startup. Their typical affiliation with a larger team provides a wealth of collective knowledge and resources beneficial to your fintech company.|
|Experience||Outsourced FINOPs, through their exposure to a variety of clients and scenarios in the financial sector, bring a broad perspective, deep understanding, and adaptable problem-solving skills, often surpassing the specific experience of an in-house FINOP.|
|Cost||Hiring an outsourced FINOP can be a cost-effective strategy for fintech companies or startups, providing access to top-notch experts without the financial burden of a full-time employee or team.|
|Scalability||As fintech companies grow and evolve, their financial and regulatory needs can rapidly change. Hiring an outsourced FINOP provides scalable, adaptable expertise that can efficiently handle increasing or fluctuating workloads and complexity.
This team’s broad expertise and experience can meet your present and future needs.
2. How Much Does it Cost to Outsource FINOP?
The typical price range for an outsourced FINOP is $1,500 - $7,500 per month. But this cost varies widely due to multiple factors:
- Complexity of the company's financial operations
- Level of regulatory compliance required
- Size and growth stage of the company, and
- Specific services provided by the outsourced FINOP
Outsourced FINOP Compensation Options
There are multiple outsourced FINOP payment options:
- flat monthly fee
- hourly rate
- additional fees for specific tasks or projects, such as preparing regulatory filings or implementing new financial systems.
When evaluating your options, carefully consider the total potential spend and all required tasks that your team does not have expertise in or time for.
The most frequent mistake we see is fintech founders underestimating the sheer scope of critical tasks, engaging an outsourced FINOP on an hourly basis, and ending up with unexpected massive bills that get out of hand quickly in case of a regulatory inquiry.
The best outsourced FINOP cost structure is a flat fee, especially at the onset, when setup and ramp-up costs are the highest.
How to Find People with Series 27/28 License?
There are four main sources of qualified, experienced candidates with the proper series 27/28 license and credentials. These are:
- professional networks
- job boards and freelance platforms
- industry associations and directories
- FINOP outsourcing firms
And only one option guarantees you find them and find them quickly: the outsourced FINOP service provider.
Examples of where to find people with series 27/28 license:
|Source||Example||Key Benefit of Source|
|Professional Networks||LinkedIn (Search Results)||It’s free to leverage your professional networks to find potential candidates. Reach out to colleagues, mentors, or contacts in the fintech industry for recommendations.|
|Job Boards and Freelance Platforms||LinkedIn Job Board (Examples)||Job platforms allow you to post free job listings, review applications, and hire a professional who meets your requirements.|
|Industry Associations and Directories||Financial Industry Regulatory Authority (FINRA)’s Compliance Vendor Directory||These organizations often have paid or vetted directories or lists of service providers, including outsourced FINOPs.|
|FINOP Outsourcing Firms||InnReg
Ernst & Young
|These firms typically have a team of professionals with different qualifications and expertise, so you can find a FINOP who meets your specific needs.|
Conclusion: Did You Decide on Whether You Want to Explore an Outsourced FINOP?
In this comprehensive Guide, we gathered all of the answers to our client questions who needed to decide whether FINOP outsourcing is right for them now or in the future. If you have a unique situation and cannot find an answer to your question, do not hesitate to consult with our approachable experts.
Consult with the Experts
Need help with outsourced FINOP support or information? Reach out today for a free consultation: firstname.lastname@example.org or call now at 305-908-1160.
The road to success requires optimizing your regulatory structure, business, and operational models and then developing the optimal cost-benefit structure for fintech compliance. InnReg helps fintechs like yours acquire the crucial advantage needed to streamline compliance operations, maximize profit, and minimize costs and risks.
The Author: InnReg is a team of over 30 Regulatory Compliance and Innovation Consulting experts helping fintechs succeed in highly regulated markets since 2013, globally. InnReg provides fintech compliance and operations consulting and outsourced FINOP services focused on mitigating regulatory risk while helping clients launch innovative fintech products and services.