No escaping increased compliance burden
No one in the wealth management industry is going to be able to escape the increased focus on regulatory compliance this year, according to financial services consultancy T&C.
The consultancy, headed by former Snow Financial Group chief executive, Tony McDonald and former Snowball chief operating officer, Carl Scarcellam is arguing that "strategic compliance" will transplant "transactional compliance" this year.
They described "transactional compliance" as being largely static, box-ticking and based on the well-known maxim of "CYA".
"No-one in the wealth management industry will escape the harsh glare of a burgeoning regulatory load and heightened compliance surveillance," a T&C analysis said. "There is nowhere to hide from the need to take a far more strategic and comprehensive approach to compliance in 2015, especially when it comes to portfolio monitoring and delivering investment solutions that are ‘true to label', in accordance with clients' needs and unequivocally in their best interests."
The pair pointed to recent evidence of increased demand for compliance professionals, but said that the hiring of compliance personnel alone would not suffice unless a more strategic approach was taken.
They pointed to the example of the strategic approach to compliance for Managed Accounts and the monitoring of investment portfolios and their mandates.
"With the advent of smart, flexible technology (ie Digitalisation), compliance can be moved to the front end of the portfolio management process and applied throughout as a client-tailored overlay that ensures portfolios are ‘true to label', in accordance with clients' needs and unequivocally in their best interests," the T&C analysis said.
It claimed that under a transactional compliance approach, client's portfolios could actually be found entirely compliant with an organisation's research recommendations, or with its Approved Product List (APL), but be disconnected from what might be in the client's specific long-term interests, stated personal preferences and have drifted away from full mandate compliance.
"Strategic compliance starts with a robust, scalable industrial strength system, led by the client's own rules, preferences and constraints, anchored by clear organisational model and portfolio mandates, neutral positions, ranges and rules, and totally integrated into the entire investment and portfolio management process, with feed-back loops and continuous improvement mechanisms," the analysis said.
It concluded on the note that digitalisation aided and abetted by disturber technology was rapidly becoming available to embrace strategic compliance that preserved and enhanced enterprise value.
Recommended for you
ASIC has cancelled the AFSL of an advice firm associated with Shield and First Guardian collapses, and permanently banned its responsible manager.
In the run-up to heavy losses expected at the end of the financial year, June has already reported consecutive weeks of adviser losses.
ASIC has banned a former NSW adviser from providing advice for 10 years for investing at least $14.8 million into a cryptocurrency-based scam.
ASIC has sent warning notices to social media finfluencers who it suspects are providing unlicensed financial advice to Australians as part of a global crackdown by international regulators.
