A new chapter in compliance: the future of private banking and wealth management
September 5, 2018

All over the world private banks and wealth managers are facing increased pressure over costs, tougher regulatory demands and requirements for greater transparency. It looks like the industry has until now been underinvesting in its back office, and many businesses continue to use manual processes while higher budgets are being directed to better support client relationship managers and the front-end client experience. But soon, it all will change.
Cross-border regulatory standards and international sanctions, and customer protection and transparency-related processes impact the front-end client experience and increase costs. Capgemini’s 2018 report on trends in wealth management stresses that not only do post-recession regulatory mandates make compliance functions vital for wealth management firms, but that the cost of doing business in the sector is rising with ever more global regulatory changes.
“New regulations (only in 2016 Reuters Regulatory Intelligence tracked 52,506 updates globally) are putting significant focus on investor protection and client disclosures. Organizations are dedicating time and money to combat these challenges,” states the report.
Higher costs and downward pressure on margins can be especially challenging for small firms and “consolidation may be the only answer to survive in such a situation.” Another proposed solution may be to outsource back- and middle-office functions as well as amalgamating best practices.
For employees in the industry all this means they should accelerate their learning and develop another level of flexibility. This includes getting to know about new RegTech opportunities: this is technology that helps financial services firms meet their compliance obligations efficiently, while at the same time aiming to improve client-advisor experience. Employees should also be up to speed on best practices regarding new compliance regulations and, if necessary, keep an open mind about changing the whole business model for scale and efficiency.
In its wealth management outlook (2018) Ernst and Young mentions that wealth managers with traditional business models will largely disappear, while holistic wealth management will emerge “as a new kind of digitalized business model. Holistic wealth managers are expected to gain a market share of 30% by 2025.”
It is clear that over the next few years banks and wealth management companies will continue to strengthen their internal control systems and train staff in order to reach even higher levels of compliance with anti-money laundering and counter-terrorist financing standards. Staff training, aimed at teaching real-life risk management skills in line with international standards, will be among the top priorities in compliance.
Originally published at albertcliff.com.
