Wealth management institutions have been dealing with greater complexity in areas of compliance and regulation. As the number of jurisdictions increases, so does potential liability and, as a result, global companies must embrace digitalisation to stay clear of legal hot waters.
In a new blog post, Wealth Dynamix stated that WealthTech firms failing to embrace digitisation and process automation is in grave danger of dropping the compliance ball.
As regulation spiralled following the financial crisis, and digitisation of compliance processes became more commonplace, the primary focus was on meeting regulatory requirements. The challenge for wealth managers has been and will be to adapt to regulatory change in the smartest and most cost-effective way. Failure of institutions to achieve this could result in spiralling compliance costs, having a significant impact on the bottom line.
From regulatory requirements such as recording all activity that culminates in advice across all channels to capturing and retaining data appropriately to ensure data privacy, manual compliance processes have become untenable due to the volume and complexity of monumental regulations, such as MiFID II and GDPR. It said, “The vast array of compliance processes that must be completed according to a regulator prescribed schedule are increasingly difficult to execute properly and on time. Failure to track effectively and hit deadlines exposes your firm to compliance risk.”
Indeed, a digital approach to regulatory compliance is now considered non-negotiable – more so after the ongoing pandemic-induced lockdown. By automating compliance tasks, both advisors and compliance teams can ensure the right measures and the right processes, at the right time.
“For instance, when conversations with prospective clients are automatically recorded, transcribed and analysed during the initial engagement phase, an indisputable and authoritative record is created and compliance is assured. Compliance risk and process flaws are quickly detected and your compliance team can redeploy intellectual capital to focus on client service, not compliance administration,” it detailed.
Companies also face the problem of a large backlog of data remediation within a mandated time frame, which requires data extraction and ingestion tools to automate effort.
According to Wealth Dynamix, compliance automation can prove to be increasingly beneficial, because wealth managers are now leveraging data captured for compliance for other purposes. For example, key KYC data including attitude to risk, demographics and preferences, can be digitally analysed to identify other products and services that may be relevant to the client, thereby creating opportunities for AuM growth and increased share of wallet.
In addition, “recordings of interactions can be used to breed best practice and improve prospect management in the future. High performing individuals and teams can be showcased as best practice examples, and those who are performing sub-optimally can receive additional training,” it said.
Undoubtedly, keeping abreast of all the nuances of compliance and innovation trends around the world is clearly no easy task. For those who have successfully automated compliance processes and are leveraging compliance data throughout the client lifecycle, not only are clients’ best interests being safeguarded, but they are equipping their relationship managers to improve service and performance over time.
