Adviser productivity

Staying Ahead of the Evolving Regulatory Landscape in Financial Advice

3 min read

In the ever-evolving landscape of financial services, staying ahead of regulatory changes is not just a necessity but a strategic advantage. Recently, Jana Sivananthan, CRO at 7 IM shared his expertise with Andy Johnston, Board Adviser at Aveni, in a webinar that shed light on the current regulatory environment and its impact on wealth management firms. Their conversation provided valuable insights that risk and compliance professionals in financial services should take to heart.

The Regulatory Roadmap

Andy kicked off the discussion by highlighting the backdrop of recent regulatory activities and media reports that have stirred the industry. “We’ll be exploring some of the practical implications for wealth management and financial advisory firms on the back of some really important regulator activity,” he noted. The Financial Conduct Authority (FCA) has been proactive, issuing publications and thematic reviews, particularly focusing on retirement income advice and consumer duty.

Jana emphasised the importance of understanding the FCA’s strategic objectives. “The FCA gave us a really clear roadmap. Just like any good business, they have a business strategy,” he said. The FCA’s strategy, spanning from 2022 to 2025, outlines key areas of focus and expectations for financial services firms. This clarity provides a structured framework within which firms can operate and align their compliance efforts.

Consumer Duty and Its Implications

A significant portion of the discussion revolved around the concept of consumer duty, a term that has dominated recent headlines. Jana explained, “The consumer duty, the baseline of a lot of the expectations, is a step change in regulatory approach.” This duty aims to ensure that firms consistently deliver good outcomes for consumers, focusing on transparency, fairness, and suitability of advice.

Andy provided context by sharing demographic statistics: “By 2050, over 25% of the UK population will be over 65.” This aging population underscores the critical importance of retirement income advice, as unsuitable advice can have significant repercussions for individuals at this stage of life. Firms must prioritise thorough documentation and robust processes to safeguard both their clients and themselves.

M&A in the Regulatory Spotlight

The conversation then shifted to the impact of regulatory scrutiny on mergers and acquisitions (M&A) within the wealth management sector. Despite the increased regulatory demands, Jana pointed out that the fundamental drivers of M&A remain unchanged. “The underlying themes that are driving that haven’t really changed,” he said, citing demographics, consolidation, and digitisation as key factors.

Andy agreed, noting that while the rationale for M&A is as compelling as ever, execution now involves additional complexities. “The execution probably has a degree of additional complexity to it now,” he observed. The rising costs of borrowing and capital further complicate the M&A landscape, but firms that can navigate these challenges are well-positioned for growth.

Leveraging Technology and Data

In the final segment, the discussion turned to the transformative potential of technology and data. Jana is a strong advocate for the positive impact AI tools can have on wealth management firms. “I think it can be both a challenge and an opportunity,” he remarked. Firms that embrace technology and leverage data effectively can not only meet regulatory requirements but also enhance their client propositions.

The role of artificial intelligence (AI) and machine learning (ML) was highlighted as a game-changer for the industry. “The firms that are able to leverage that are going to be in a much stronger position,” Jana predicted. Clean, meaningful data is crucial, and firms must invest in systems that ensure data integrity and usability.

A Positive Outlook

The webinar concluded on a hopeful note. Despite the challenges posed by regulatory changes, there are ample opportunities for firms willing to adapt and innovate. “There is a lot to be optimistic about,” Andy affirmed. By staying informed and agile, risk and compliance professionals can help their firms navigate the regulatory waves and emerge stronger.

In an industry where change is the only constant, the insights shared offer a roadmap for success. Embracing regulatory clarity, leveraging technology, and focusing on client outcomes are key strategies for thriving in today’s dynamic financial services landscape.

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