Regtec, regulatory technology, has been coined as a phrase as the sister to fintech (financial technology). Although technology has been used in the regulatory space for nearly twenty years now, this is its latest manifestation and will enable advisers to better regulate themselves, through automated technology. As an emerging global industry, it is projected to grow to £98 billion by 2020, according to Reuters.
Regtec has already swept through the asset management industry and is now looking likely to be adopted by advisory firms as well, with its potential to help them reach more clients, through even more channels and without the worry of compliance. It remains to be seen whether regtec can meet the different requirements of advice firms and if demand will be large enough for it to have a significant effect.
How does it work?
Regtech solutions leverage advanced data automation and information management technologies and are often delivered on a software-as-a-service (Saas) or cloud-based model. By using powerful analytics, they enable the fast vetting of transactions and client data, the effective management of data, quick and standardised digital reporting and real-time compliance monitoring. Some of the main advantages include fast deployment, flexibility and scalability. This also means regtech applications can be easily updated, allowing firms to respond quickly to new requirements and reduce their technology costs.
How does it help advisers?
Regtech is aimed at making the whole advice process more efficient. A significant benefit for advisers and their clients will be the cutting of research charges. Research provider, Alpha Exchange currently uses regtech to help asset managers find the most reliable information, cutting time and cost. It will also help keep compliance and record-keeping integrated.
Another example of regtech being put to good effect is the compliance tool, Helm, which gives firms instant visibility of all their compliance and cyber security gaps. Similarly, RecordSure uses machine learning and artificial intelligence to simplify and classify the huge amounts of data produced by customer interactions, including the spoken word. Unlike traditional speech analysis, which just monitors keywords or phrases, artificial intelligence can identify meaningful phrases from conversations even about complex financial topics!
As one of the key requirements of Mifid II, due in January next year, will be the recording and documenting of client telephone conversations, this type of technology will be extremely useful in helping advisers meet this kind of regulatory change. The technology should also be able to help with the archiving requirements and ensure firms achieve compliance with the new regulations.
In an industry that has seen a vast amount of frequent and radical regulatory change, regtech could be just what is needed to help fintech innovations be accepted and bedded down. In fact, the rise of regtech just goes to show the broad, growing and useful church that is fintech! It’s a thriving place of innovation, which is continuing to develop solutions with significant benefits for any forward-thinking adviser willing to jump on board.
Interested to know how you can ensure that your CIP is inline with new changes and technologies? Get our complete guide to developing and managing a CIP here.
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