Wealth Dynamix on conduct risk and why wealth managers can not miss an opportunity

Conduct risks are driving important innovation in the country’s banking and wealth management industry. Is there an opportunity for wealth managers?


UK regulations about what is called “conduct risk” are driving important innovation in the country’s banking and wealth management industry. However, many wealth managers regard conduct risk as yet another pretext for bureaucrats to set out more laws on an industry already groaning under a mass of rules. It is possible that those firms that embrace how to address such risk will benefit, given a sensible approach, argues the chief executive of WealthDynamix, Gary Linieres. The views of the author are a welcome addition to debate; as ever, the editors of this publication do not necessarily agree with all the views expressed.

“The Client is King and at the heart of everything we do” – or so they say. However, old adages are starting to become reality and ever more so since the Financial Conduct Authority’s conduct risk regulations started to take shape, calling for sweeping changes across the wealth management sector in all aspects of client management.

With media commentary intensifying around such issues as banking secrecy, mis-selling, transparency and tax evasion, the future of pension annuities and the changes to how pensioners can manage their own cash, the question of how institutions manage and onboard client business is ever more under the spotlight and is now “mission critical” for any serious wealth manager.

I believe it is fair to say that the industry remains divided with currently only around 25 per cent of wealth management firms having conducted serious conduct risk assessments and only approximately 15 per cent having actually implemented a technology strategy to address the issues.

Many wealth management firms now understand the FCA’s reforms and see the clear commercial advantages of adopting a more transparent and technologically-enhanced business practice. Compeer, for example, says that currently 75 per cent of the industry’s wealth managers are planning to increase the budgets of their compliance departments in the next 12-18 months, with 44 per cent seeing it as an opportunity to introduce positive strategic change.

However, there remains a camp of resistance and opposition who resent this prevailing cultural shift and the perceived operational upheaval and potential loss in revenues they believe this will bring. In fact 88 per cent say that this regulatory change isn’t justified and almost 80 per cent find the extra workload of dealing with these regulations difficult or very difficult. It is widely believed that the biggest threats that wealth management firms face in 2015/16 are lack of experience and changing expectations from the regulator, as well as not having enough time and money to change strategy and the unintended consequences from the MiFID II [EU regulations] for the UK.

The strength of UK financial institutions and our market leading position is founded on a unique mix of attractive economic, social and market strengths that make British investment firms amongst the most revered and competitive on the global economic stage.

But as we move forward into this new era of centralised codes of practice and widespread industry reform, it is the innovators and the business leaders who fully embrace the drive towards cultural change and increased regulation around the conduct of boards, senior management and client managers who will see their assets and revenues flourish.

Several UK firms have fallen foul of the regulator and incurred significant fines and sanctions due to their inability to demonstrate sound client record keeping and evidence that they have advised their clients suitably based on their current circumstances. Of course client suitability is only one of the pillars of the conduct risk framework and organisations that just focus on fulfilling basic client records and know-your-client data are not really addressing the more fundamental issue of conduct risk.

A solid and well-executed conduct risk framework backed with the right technology investment will play a vital role in future–proofing investment business going forward. Firstly, by safeguarding fundamental client and business relationships, but further, it can also deliver significant new business potential. This is through improved client acquisition and onboarding, the creation of sustainable and measurable investment strategies and providing critical management information to drive business efficiencies and key performance indicators to the benefit of senior management, relationship managers and, of course, the client. Approximately 50 per cent of UK firms plan to make a major upgrade to their IT systems over next 12 months.

At Wealth Dynamix, we have noted the many benefits felt by major investment firms like Charles Stanley, Ruffer, James Hambro, Quilter Cheviot and Brewin Dolphin who we have worked with to deliver client management solutions that provide both a leading CRM system and a conduct risk-ready platform.

Any firm that takes conduct risk seriously and enshrines superior client outcomes as a central tenet of the business needs to invest in the measurement, monitoring and execution of all client interactions while retaining profitability and operational efficiency.

Wealth manager typing on laptop hoping not to miss an opportunity

This can only be achieved with appropriate technology which provides the following key capabilities:

• A centralised client master file designed with the right data model which correctly distinguishes the person or body corporate as the legal entity that advice is being given to or from whom instructions are received;

• A user interface that provides a single point of access to all relevant client information in the context of the specific relationship in support of giving the best advice at all times;

• Integrated contact and activity management providing efficient communication to and from authorised persons;

• Open architecture allowing seamless integration with core transactional and accounting systems, document management and communications infrastructure;

• A flexible approach to data capture and form design that allows each organisation to define the right level of detail appropriate to its clients and service offerings;

• A flexible approach to process definition and workflow enabling the efficient collaboration of tasks and data capture in the right place at the right time;

• A powerful document generation tool to produce client-facing letters, proposals and review forms so that client documentation is included in the evidence trail efficiently and securely;

• A powerful management information platform that allows KPIs to be defined and measured;

• A low risk modern technical platform and skilled resource availability.


In a competitive and diversified market, customer profiles and product offerings will naturally vary between firms. Each organisation must address the specific risks associated with poor client outcomes from their actions and these risks will vary in scale and focus depending on the business model. It cannot be true that one standard client management solution would support every business model when it comes to a detailed understanding of the client relationship.

The FCA requires that firms not only manage and monitor that risk but actively implement strategies that will mitigate against poor client outcomes. Firms need to demonstrate how they are doing this.

Gary Linieres, CEO, Wealth Dynamix

Since launching in January 2013, Wealth Dynamix has undertaken a number of high-profile deployments in the UK wealth management sector that have provided a CRM-based technology that has specifically been created to address the issues of client record keeping, client suitability and client onboarding. The firm says its business has been “growing exponentially”.


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