Compliance woes weigh even heavier

By Daniel Eriksson
28 February 2017

Steel yourself. A barrage of new and tightened regulations are bearing down on the wealth management industry. And worryingly, the vast majority of respondents to the 2017 Wealth Management Technology & Operations Trends report[1] expect the pace of regulatory change to increase further over the next three years.

The greatest headaches? Suitability, FATCA, Dodd-Frank, the EU’s latest AML directive and MiFID II top the list. And even if Donald Trump lives up to his pledge to roll back regulation – including dismantling parts of Dodd-Frank – firms will still face a myriad of sometimes conflicting rules from multiple jurisdictions.

With no choice but to comply, all wealth managers can do is tackle their regulatory responsibilities in the most effective way possible.

Weak links

Firms’ data management capabilities will be central to this effectiveness. But across the industry, data capture is a key area of failing.

As the report highlights, “inadequacies in client onboarding – which incredibly is still largely paper-based at some firms – are the root cause of much of the industry’s compliance woes.”

Evidencing suitability will be a particular challenge, points out the report. The rules are expected to have the greatest impact on wealth managers’ operations and systems going forward, requiring firms to adopt processes and technology to ensure you can prove the suitability of your advice.

MiFID II presents another significant data challenge, especially around trade transparency, reporting and best execution. Wealth managers that operate globally, and serve a highly-mobile client base, face a further layer of complexity in determining which clients will be subject to the rules.

Many institutions are also struggling to capture the required data to satisfy cross-border tax reporting obligations. According to the survey, firms are still struggling with FATCA, and that is before the Common Reporting Standard is rolled out around the globe in 2017 and 2018.

The technology solution

The strain these regulatory changes are putting on front- and back-office staff will be unsustainable unless firms can shift to a more efficient and scalable approach. Which is why the right technology solutions and associated services are so crucial.

According to the report, wealth managers are already becoming more reliant on technology to meet their regulatory requirements, and nearly every survey respondent says it could play a still greater part.

“Having technology vendors take more of the compliance strain so that firms can focus on revenue-generating activities will obviously hold great appeal,” the report concludes.

[1] Technology & Operations Trends in the Wealth Management Industry 2017, by WealthBriefing and SS&C Advent

To get a full copy of the report, visit “Technology & Operations Trends in the Wealth Management Industry 2017”.