Regulation Remains a Challenge for Asset Managers

At the end of June, the Institute of Financial Services Zug IFZ released a study into the Swiss asset management market. The study found that regulation is the single biggest challenge for Swiss asset managers, scoring above other core concerns such as acquiring new clients, competition, the availability of skilled workers and high production and salary costs. Participants in the study said they were concerned that the Swiss regulatory regime should be in line with global standards to ensure a level playing field with international competitors; something the researchers believe highlights the need for an ‘integrated’ regulatory framework with a mechanism to ‘ensure equivalence’.

Put alongside other reports into the challenges faced by financial sector firms, this latest study helps show just how intractable the regulatory challenge has become. Every year, for example, RIMES runs a client survey, where we aim to gain an understanding of the main priorities and concerns of firms in the buy- and sell-sides. As in previous years, the 2018 covered some of the main regulatory challenges experience in financial sector firms.

What was clear from our survey is that many firms have yet to prepare fully to be able to meet increasing regulatory burdens.  On average, only 40% of respondents admitted to being ready or on target to meet their upcoming regulatory obligations. Significantly, more than a third of respondents were unaware of their organization’s preparedness for regulation. Our report focused on the EU Benchmarks Regulation (BMR), as this came into force in January this year. Over 40% of investment managers believe that the Regulation is an inconvenience, whilst 30% recognized that it had either a significant impact or complicated their current operations.

The fact is that the regulatory compliance challenge is only going to increase for financial sector firms. BMR, the Market Abuse Regulation, the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation and many other landmark regulations are placing unprecedented demands on compliance teams and forcing them to put in place new reporting processes and market surveillance technologies, while increasing operational oversight.

However, while firms need to act as soon as possible to achieve compliance, the approach need not be overly costly or disruptive. The market has reacted to the increase in regulatory complexity and firms can now achieve compliance rapidly and cost effectively through ‘RegTech’ managed services. The benefits of this approach over comparable in-house projects are numerous. Not only do firms not need to increase their internal compliance teams, but managed services leverage economies of scale to keep price points low. Also, as the compliance capabilities are provided as a cloud service they can be seamlessly integrated into existing in-house data systems.

As firms look to address the long-term challenges of regulatory compliance, managed data services provide a clear and compelling model for rapid and comprehensive compliance.

To receive more information about RIMES’ RegFocus® family of services for regulatory compliance, please contact us.

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