The financial services industry in Europe is undergoing massive regulatory change of late, perhaps more so than anywhere in the world. They’re not alone in feeling regulatory pressure, of course. Firms around the globe have been dealing with the impact of the last decade’s economic recession and financial crises, in the form of complicated, overlapping, and ever-changing regulations.
In my role at NexJ, I’ve spoken with numerous wealth management and private banking firms about how they’re dealing within the stringent new framework mandated by regulators. Many are still undergoing technology assessments and operational adjustments to address the first round of regulations.
Now, as Europe braces for new requirements from MiFID II, additional AML oversight from the FCA, and ongoing thematic reviews for Suitability and Appropriateness, it seemed like the right time to discuss the technology capabilities you should be considering to hit the ground running.
Over the next few weeks, I’ll look at MiFID II, AML, and Suitability and Appropriateness through a wealth management and private banking lens. First up: MiFID II.
The goal of MiFID II, which goes into effect on January 3, 2018, is to expand investor protection and improve transparency. The regulation is introducing new standards for:
- Client Interaction Recording
- Transaction Reporting
- Client Categorisation and Product Governance
- Suitability and Appropriateness
- Cost, Charge, and Inducement Tracking
- Organisational Oversight
Compliance is going to require extensive changes to a firm’s business model, operations, systems, and processes across the front-, middle-, and back-office, even for U.K. firms that are already addressing some requirements due to existing regulations like RDR and Senior Manager Regime.
This is where I see a real opportunity for technology to help alleviate the burden of these requirements. Specifically, I believe customer-centric CRM, integrated with back office and financial planning systems, can help firms meet these new compliance obligations without disrupting business processes or tying up resources on manual data entry, validation, processing, or reporting. The following will be critical:
Robust integration capabilities: Firms will need to integrate their CRM with multiple data sources; applications such as telephony, financial planning, portfolio management, order management, suitability, and analytics; and channels to create a single, comprehensive view of the customer. The diverse range of inputs requires extensive flexibility in integration methods and the ability to share data.
Business Process Management capabilities integrated with CRM: New regulations place heavy emphasis on collecting the right information during onboarding and reviewing it on a regular basis. Investing in CRM with easily configurable SmartForms and workflows future-proofs the business against upcoming regulation changes. It supports client categorisation, product governance, and suitability and appropriateness requirements and enables a more accurate, complete, and efficient process
Reporting and Dashboards: Reporting and monitoring requirements abound in MiFID II. Solutions that enable end users to run ad hoc and pre-built reports without reliance on IT will prove invaluable in complying with both on-demand and scheduled client and regulatory reporting. Graphical dashboards that provide real-time and historical KPIs, financial performance data, and training status will be essential to meet organisational requirements for monitoring and assessing advisor competence.
What challenges are you encountering in preparing for upcoming regulatory requirements? Interested in learning more about how we’ve helped leading wealth management and private banking firms demonstrate compliance? Leave me a comment or reach out to me, and I’ll be happy to discuss.