UK Wealth Management Series: Transforming Compliance into a Business Opportunity (Part 2)

In the introduction to our UK Wealth Management series, we mentioned the new compliance realities of the post-2008 wealth management industry; now, we’re going to discuss how firms can transform these new requirements into an opportunity for business growth.

MiFID II, PRA, FSMA, EMIR, iNEDs, and AML are just a sampling of the number of new regulations and oversight regimens implemented in reaction to last decade’s financial crisis. This wave of regulation has been overwhelming at times for wealth management firms, which have been struggling to adhere to the new, more complex requirements.

In fact, according to InvestmentWeek, there were 1,335 notifications of inaccurate transaction reporting submitted to the Financial Conduct Authority (FCA) in the first year of MiFID II – and that only represents firms that “noticed they were in breach” of the new rules. Indeed, the report notes that “many thousands” more firms are likely submitting inaccurate reports without catching them and informing the regulators.

Due to the perception of severe and repeated misconduct within the financial services industry, some of the strongest regulatory changes have been to pay policies, with the BBC noting that bonuses in this sector have been referred to as “reward[s] for failure.” As a result, we’ve started seeing a renewed focus on improving culture and governance at wealth management firms. We expect that to continue as they invest in more technology and process improvements to avoid fines and reputational risk in this new regulatory landscape.

The pressure is on to fulfill compliance obligations without diverting attention from other strategic priorities – for instance, updating legacy systems, dealing with overcapacity, and overcoming intense competition for the most valuable customers.

Overcoming the Data Deluge

Meeting regulatory requirements can be a massive burden — and a major business risk — when data issues and inefficient processes get in the way.

Heavily manual processes can drag down sales and advisement operations; meanwhile, industry turnover (which we’ll address in a future entry) as well as information disconnects between departments and technology systems create uncertainty and human error in the data-gathering process. Circumventing roadblocks like these requires eliminating manual processes altogether and automating data input – creating more precise and useful data that ensures clear records of compliance every step of the way. 

Once your data’s clean, you can delve into it, utilizing advisor performance data to identify and standardize preferred behaviours to drive compliance across the entire firm. This analysis will isolate patterns of behaviour to avoid while pinpointing compliant behaviours that have proven successful for top-performing advisors – which you can then use to craft benchmarks for the rest of the workforce. 

Communicating and Enforcing Expectations

Properly designed incentives motivate advisors to perform activities desired by management – in this case, following the compliance strategy. Set your targets based on compliance and transparency benchmarks, aligning compensation accordingly to sustain the desired behaviours among your advisors.

With data-based performance processes in place, you’ll be able to see which advisors are (and aren’t) adhering to your standards. Meanwhile, managers will have the actionable insights they need to provide real-time coaching for subpar performers – intervening before bad habits are established while clearly articulating how sales behaviours can impact an advisor’s compensation.

Measuring Success

With clean data that’s been consolidated into a single source of truth and a transformed reporting process, wealth management firms can begin monitoring both compliance and success proactively in real time.

Too often, reports are treated as an afterthought, which results in a simplistic view of the data – it gets displayed “as is,” without meaningful analyses or insights. Without sufficient depth of analysis in your reporting, the onus is on the recipients to draw their own conclusions, often with information that’s completely irrelevant to their roles.

The good news is that unified platforms and reporting apps that utilize story visualization result in data highlights automatically tailored for every level of a firm’s hierarchy – from advisors to managers to executives – and delivered in an easily digestible format. The old days of sending confidential data out via email are over; now, each of your recipients can have a personalized dashboard that shows only what’s relevant to that person individually. That saves valuable man-hours while instilling easier, more secure compliance processes.

As challenging as all these new regulations have been to accommodate, the dust is finally settling. That means now is the time for wealth management firms across the UK to solidify their data and reporting practices in a way that not only supports a compliance-first strategy, but also powers business growth. Ensuring a clear record of compliance and streamlining critical data management will reduce the risk of fines while setting your firm up for long-term success.

Chris Glass

Sales Director

Chris has nearly 30 years of sales and sales leadership experience. He excels in planning and executing high growth sales strategies of new and disruptive products and services into the EMEA market. Chris is highly regarded for recruiting and developing highly effective world class teams, while engendering a culture of collaboration and communication.

Don’t miss any of our sales operations tips!
Subscribe to receive a weekly summary.