Technology can ease the regulatory burden

Advisors and dealers are looking for strategies to remain compliant while managing costs and improving client satisfaction

By: David Reeve February 7, 2019
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Over the past decade, new regulations have substantially increased the volume of information exchanged between advisor/dealers and clients. In many cases, this disclosure information has been delivered on paper, driving dealer costs up and client engagement down. The distribution of fund financial statements and management reports of fund performance (MRFPs), the introduction of Fund Facts and the second phase of the client relationship model (CRM2) reports have all increased the volume of information sent to clients. Pending regulations such as client-focused reforms have the potential to further increase the volume of information flowing between advisor and investor.

With this flood of regulation and paper, advisors and dealers are looking for strategies to remain compliant while managing costs and improving investor satisfaction — a tall order. We see three main strategies that will help address these challenges.

Bridging the digital gap

The conversion of paper-based compliance documents to digital form is a huge industry opportunity in terms of cost reduction and investor satisfaction. A recent JD Power report on banking states: “Increasingly, all signs are pointing to digital advice offerings as the channel where retail banks can drive the most significant improvement. While 57% of customers say they’d like to receive advice via digital channels, only 10% of them do.”

Despite this digital gap between customers and their financial institutions, there are notable success stories. Several of our clients have recently seen significant adoption of digitally delivered financial statements and MRFPs – moving from 0% to more than 50% digital delivery in one cycle. The replacement of the prospectus with a Fund Facts document also has been a great digital story. Our dealer clients are seeing digital adoption of more than 90% for Fund Facts delivery, which has been a huge shift compared with the printed prospectus. The key to unlocking more digital transformation of compliance documents rests with technology that is available today, making it simple and frictionless for the investor to choose a digital channel and using an engaging digital delivery experience to delight the investor.

Integrating regulations

As the industry has scrambled to address one regulation after another, many dealers and advisors have layered multiple solutions to serve their investors. This complexity of technology is challenging for both investor and advisor. We see a movement in the industry to take stock of all regulations and consider an integrated solution that will address point of sale, CRM2, client-focused reforms and other client reporting. Each of these regulations targets a specific stage within the sales process, which suggests that an integrated solution is a realistic opportunity. As industry technology matures, we expect that the volume of information supporting these regulations will also be harmonized, streamlining the compliance tasks for the advisor and making the investor experience less confusing.

Reducing the burden

The regulators are also recognizing the burden that increased regulation has placed on the industry. The Canadian Securities Administrators (CSA) has recently tabled an initiative to reduce this burden. The CSA is reviewing the volume of disclosure provided to investors, specifically reviewing operation changes, rules that have become outdated or unnecessary and opportunities to streamline investor disclosure. Over the course of the next year, we anticipate good news on this front, which will be great news for the industry.

The intersection of rapidly evolving technology, growing client digital demands and the recognition that regulation can be streamlined suggests that optimism should prevail for the future of advisor/client communication.