More Complex Products Mean Greater Oversight Demands

As investment products grow more sophisticated and become increasingly tailored to address risks such as longevity, inflation and market volatility, firms face mounting pressure to ensure their governance, training and supervision frameworks keep pace.

At the Financial Industry Regulatory Authority’s 2026 Annual Conference panel, “Supervising Complex Products in Today’s Market,” industry experts said the challenge is not simply managing complexity, but making it understandable for advisers, supervisors and especially clients.

Even “plain vanilla” products are evolving, according to Nicole McCafferty, FINRA’s senior vice president and core investigations lead and a panel speaker. She noted that innovation is less about product engineering and more about responding to investor demand—for downside protection, income certainty and growth with reduced volatility.

Another panelist, Heidi Kaiser, chief compliance officer at Jackson National Life Insurance Co. said, “retirement problems are complex and complicated … clients want growth, but they want it [to seem] less scary.”

Training and Education

Complexity often arises from how individual features interact. Riders, elections and market conditions can combine in ways that are difficult for both advisers and investors to fully understand, creating challenges for supervision and suitability oversight.

Alongside this, firms are increasingly relying on formal product governance structures. Large organizations, in particular, are adopting tiered product approval committees to evaluate new offerings and monitor them over time.

Carlos Torres, a managing director in compliance and operational risk at Bank of America, said during the panel discussion that his firm uses a risk-based framework for new products. Its set of core questions includes determining the client need served by the product, whether duplicative solutions are already on the platform and what risks the product poses for the firm and clients.

“That process is supported by understanding what the product is and how it works,” Torres said. “Then the next question is: How are we proposing to help mitigate those risks?”

Torres stressed that governance does not end at approval. Ongoing review is critical, with firms reassessing products as they mature, as markets shift and as new risks emerge.

For product manufacturers, the governance lens has also widened. Kaiser said development processes now extend beyond actuarial design and legal filings to include a broader, cross-functional review.

“It’s not only, ‘Can the product be sold?’ but, ‘Is it explainable?’” she said.

That shift has led to more involvement from technology, operations and compliance teams, reflecting the growing importance of operational readiness. Product changes often require system updates and coding work, making technology constraints a key consideration in development timelines.

Training is also evolving to reflect products’ increasing sophistication, with a demand for education extending across firms, from product committees and compliance staff to advisers and supervisors.

“Knowledge and understanding [are] absolutely foundational,” Torres said, noting that firms cannot effectively oversee or recommend products they do not fully grasp.

Firms are moving toward more targeted approaches, including modular training that focuses on new features, rather than requiring advisers to repeat full-product coursework. Supervisor-specific education is becoming more common as firms recognize the need for managers to identify risks, monitor patterns and evaluate suitability decisions.

Additionally, panelists discussed training on not just how a product works, but how it fits into a client’s overall financial plan.

Within the distribution ecosystem, wholesalers are also taking on a more prominent educational role. Once primarily focused on facilitating sales, they are increasingly acting as translators between product designers and financial advisers.

“Wholesalers really are educators,” Kaiser said. “They’re at the intersection between the product mechanics and the advisers who have to explain those products to consumers.”

As products grow more complex, clearly understanding and explaining them has become as important as selecting them. Strong governance and training frameworks are no longer back-office functions, but essential to delivering advice in clients’ best interests.

As Torres put it, effective use of complex products ultimately comes down to “understanding and being able to explain [the products] to the client so the client themselves can understand what it is that they’re buying.”