If you’ve ever felt impeded by compliance as you serve clients, innovation in regulatory technology (regtech) may be a big part of the solution.
Regtech’s potential to change an advisor’s game at the front end to improve client service was part of the discussion at a webinar on Thursday hosted by Four Eyes Financial, a regtech firm based in Saint John, N.B., and the Canadian Regulatory Technology Association.
While Canada lags in regtech innovation relative to regions like Asia and the U.S., acceleration is occurring, said Kendra Thompson, a partner at Deloitte LLP, in pre-recorded video. “We expect that acceleration will continue as the major players in this market start to up their investment in digital,” she said.
Spending related to the client-focused reforms (CFRs) is helping the acceleration, Thompson said. The industry is examining how regtech can “bring the best of compliance and control to [the] client experience.”
Rosemary Chan, senior vice-president of internal control and regulatory affairs for global wealth management at Scotiabank, positioned the CFRs as an important step in meeting increased consumer expectations.
“We need to embrace these reforms to stay meaningful and relevant,” she said during the webinar.
In preparing for the reforms, Chris Enright, president and managing director at Aligned Capital Partners, said his firm was focused on providing advisors with better tools to improve know-your-client (KYC) and know-your-product (KYP).
For example, a challenge for advisors is addressing evolving client needs arising from trends such as increased longevity.
“Outliving your money is probably the greatest risk that any of us has,” Enright said. How do we use tech to show clients that risk and inspire conversations? he asked.
Tech can also be used to analyze how individual investments interact and thus improve portfolio construction, he said.
As innovation occurs, webinar participants called for broad collaboration, and also highlighted challenges.
For example, Enright advocated for relationship-building where friction may exist.
“There’s a big difference between a sales prevention officer and a compliance coach,” he said, calling for open discussion between those in supervisory and advisory roles.
He also noted that firms’ legacy systems represent an impediment, making innovation with data difficult.
In contrast, with data independence, his firm can effectively mine data to identify trends. Advisors understand “the why” of data gathering and buy in to the process, he said.
Enright also suggested that the ability to move clients’ data across systems would benefit clients and advisors, and also allow for better data analysis. “A better indicator of what a client is likely to do in the future is what they did in the past,” he said.
Meaningful client results are the goal of regtech innovation, rather than simply clearing compliance alerts, said Lori Weir, CEO at Four Eyes Financial.
“It’s really about the investor themselves, their confidence and the outcomes they have,” she said.
To that end, Enright said no firm should position their compliance system as a competitive advantage.
“To truly raise the tide for all boats, we have to be willing to have conversations and share information” — with other business units, competitors and regulators, he said.
Andrew Kriegler, president and CEO of the Investment Industry Regulatory Organization of Canada (IIROC), also urged discussion within the industry, and encouraged firms to participate in public debate and policy discussions.
Regarding the regulatory role, “we need to help let innovation happen,” while ensuring consumer protection, Kriegler said.
“The onus in fact is on us to […] facilitate the use of technology to better serve Canadians,” he said.