Challenging sets of existing and emerging factors contribute to the ongoing risks posed by compliance violations in the wealth management space. What’s more, the price that firms pay for not catching them can be high, ranging from costly fines and damaged professional and personal reputations, to expulsion from the industry.

Meeting wealth management firms’ priorities

Meeting productivity goals and compliance responsibilities are top priorities. Both are business necessities that require constant focus on market trends, data management and a changing regulatory environment. However, firms often struggle to allocate the right resources to meet these critical objectives.

Several factors have made meeting these important responsibilities considerably more difficult. Narrowing margins and rising competition put enormous pressure on firms’ producers as well as on their compliance teams. Plus, rising data flows coupled with the expansion and growing complexity in regulations make spotting and rectifying violations all the more challenging.

Compliance teams overwhelmed by data volume and regulatory complexity

Today’s data-driven environment adds layers of complexity that previously weren’t factors in compliance. Predictably, the legacy tools and traditional compliance oversight tactics upon which too many firms still rely are simply overwhelmed¹.

• Manual processes are a poor use of staff and subject to human error, as there is too much data for human eyes to spot.
• Brute force tactics tend to produce an abundance of time-consuming false positives.
• Random sampling is akin to finding a needle in multiple haystacks.

“Data drives everything we do today. From financial institutions to regulators to professional sports, there’s no question we’re living in a data-driven world. The differentiator is how the data is interpreted and applied.” ²

Data complexity and increasing volumes further challenge monitoring processes

The most efficient compliance processes can still be significantly hampered by the volume and quality of the data they rely on. Data must first be gathered, normalized and analyzed before it can be interpreted or applied. That in itself is a massive obstacle for most firms, as they must add new dimensions of data analytics capabilities and processes to their workflows just to do their jobs.

The data flow volumes that result from rapidly changing markets, evolving and complex asset classes and expanding regulations must be comprehensively and accurately reviewed by compliance departments. Few firms are able to meet that challenge on their own.³ Too often, in-house compliance teams find themselves reacting to infractions that have already occurred.

Of course, engaging in search and remediation efforts—while simultaneously hoping that nothing else has flown beneath their radar—is risky. Undiscovered violations may eventually surface or be repeated, adding to the potential pain of remediation and enforcement. In every sense, relying solely on remediation after the fact is an inefficient and expensive misallocation of resources.

Furthermore, reliance upon outmoded methods means firms remain at elevated risk of compliance violations and their consequences. That’s neither a strategy for ongoing success nor is it sustainable. The need for wealth management firms to adopt a proactive, data-driven compliance solution couldn’t be clearer. Cutting-edge compliance and analytics tools are needed so compliance teams can focus on the most relevant and problematic areas.

“Smart technology investment can disrupt the pattern of rising regulatory compliance costs. While technology implementations require upfront investment, firms that make the right decisions can benefit from greater cost savings in the long run.” ⁴

The way forward: Added visibility, scalability and advanced analytics

Identifying and correcting behavior that leads to potential violations is much more efficient than reacting to compliance violations after they’ve happened.

Ideally, an effective compliance solution would be driven by advanced data analytics and feature comprehensive visibility and scalability to proactively detect emerging trends across the firm that could potentially lead to violations. This would eliminate the need for manual processes, brute force efforts and random sampling.

Such a solution would enable compliance teams to identify potential problems before a violation occurred, so they could focus their attention where they can easily mitigate current and potential risks. It would also streamline compliance oversight by minimizing false positives that are so common with legacy systems.

Change the game with Broadridge’s Wealth Compliance and Surveillance solution

With its unrivaled data and analytics capabilities, the Broadridge Wealth Compliance and Surveillance solution shifts the compliance equation in your favor. Powered by proprietary algorithms, it helps you identify trends, minimize risk and potential compliance violations, and focus your resources where they’ll matter most. Unparalleled visibility couples with user-friendly dashboards to help accelerate pattern detection and streamline reviews. Plus, it’s built for scalability, so you’ll be prepared as data volumes continue to grow. The automation and accuracy of the Wealth Compliance and Surveillance solution transforms compliance and risk management, thereby mitigating cost, effort and risk.

Broadridge helps our clients get ahead of today’s compliance challenges to capitalize on what’s next.