As the amount of financial regulation around the world continues to increase and become ever more complex, wealth managers with cross-border clients face a growing challenge to keep up.
Firms that still use manual processes to track regulatory changes and ensure they are only recommending products that comply with local rules potentially risk being exposed to fines or other financial losses if they are not up-to-date with regulations in a specific jurisdiction.
In a recent webinar, we spoke to Apiax’s Co-founder Ralf Huber to discuss how regulatory technology (RegTech) can help wealth managers stay compliant no matter where they are selling their services.
Here are three key ways technology can support wealth managers…
Many firms expect their relationship managers to read all compliance policies and documents about what products they can sell, particularly when they are dealing with cross-border clients. The question firms should be asking themselves is if that is really the best use of a relationship manager’s time and whether or not there might be a more efficient solution. What relationship managers ultimately want is a straight answer—yes, you can offer this product, or no, you cannot—and if not, what could they potentially offer instead.
The key here is to provide simple answers, not a long-winded legal interpretation. In the past, relationship managers have been expected to read those compliance policies and make an interpretation themselves. In today’s regulatory environment, where rules on cross-border transactions are complex and differ from country to country, it is both unrealistic and inefficient to expect relationship managers to keep on top of those varying regulations without the use of technology.
The first benefit of having access to digital rules is being able to get a clear yes or no answer to a specific compliance question. For instance, if you are onboarding a new client and that client is based in, say, Russia, then you want to know whether or not you can sell that client a particular product.
The second benefit is going beyond that and actually providing recommendations. Say in that example your Russian client wants you to fly to Moscow for a meeting to discuss investment ideas. The digital rulebook says that isn’t possible, but instead of just saying no, it recommends other options—perhaps it is possible to call the client from a specific country or hold the meeting somewhere else. In the past that would involve speaking to a compliance officer and waiting for an answer, but with technology those alternative options would be offered instantly and automatically, better supporting the business.
Having a set of digital rules that can be referenced at any time without having to jump from one application to another means relationship managers can easily compare regulations across different jurisdictions. This can be high level information, such as whether a manager can offer investment advice in country A or country B, but it can also enable managers to look on a more granular level. Take the example of the Russian client. It might be possible to provide investment advice to that client at a meeting on the ground in Moscow, but perhaps it is not possible to sign a contract there due to a specific regulation—critical information that managers need to know in advance.
In addition, the ability to compare jurisdictions can also help firms develop their business strategy before they go into a specific market by getting a clear overview of what is permitted, creating a more reliable framework for dealing with those clients once they are onboarded.
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