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Wealth management, like every sector of the financial industry, has come in for its share of regulatory attention in recent years. Whereas the challenge of leveraging “big data” to find hidden insights dominated conversations among wealth management professionals ten years ago, industry discussions today center around complying with KYC (“know your customer”) rules and defending the suitability of investment recommendations.

As regulatory requirements have broadened and deepened across asset classes and jurisdictions, they have inflicted an increasingly heavy tax on wealth managers to ensure compliance and to keep their clients (and themselves) out of trouble.

In many ways, the growth of the regulatory burden constitutes the hidden underbelly of the FinTech boom. Distilling opportunity from an ocean of data is one thing. Exploiting that opportunity while staying on the right side of regulations can be quite another.

New RegTech ventures have stepped into the breach to support wealth managers in meeting regulatory compliance obligations. Here are a few of the ways they’re changing the wealth management landscape.

Untangling Complex Regulations to Unleash Business Potential

Regulatory text constitutes a dense, confusing stew of proscriptions and obligations written in a language foreign to most readers. Digesting and making sense of a single requirement applicable to a single asset class in a single jurisdiction takes time, patience, and a patience for complexity.

There simply aren’t enough hours in the day for individual wealth managers to absorb and implement regulation on their own, try as they might. And so, ingrained and intractable regulatory complexity inflicts a dual risk: for any given trade, an asset manager risks non-compliance with the regulations he or she knows about, and also risks not knowing about all of the regulations that may apply. 

Enter AI-driven compliance management solutions like Ascent.

Ascent is leading the way in the development of a new class of technology that teaches machines to parse and analyze regulatory text. What takes humans hours to (barely) absorb takes an AI-driven algorithm mere minutes to dissect and analyze.

These solutions hold the promise of revolutionizing wealth management by substantially reducing the risk of non-compliance and ignorance of regulatory applicability. In time, they will be able to tell wealth managers, in advance of a trade and in plain language, exactly which regulations apply to an investment strategy and exactly how to execute it in compliance with the law.

In so doing, RegTech solutions will enable FinTech/big data to achieve its full potential, freeing managers to pursue investment strategies without the fear of non-compliance. 

READ ARTICLE: How Ascent Simplifies Regulatory Change Management with Automation


Facilitating Compliance Management

RegTech also has its sights set on facilitating core compliance management tasks. For example, there are already solutions on the market (and more in the pipeline) to automate anti-money laundering efforts, such as conducting multi-jurisdictional screening of customers and identifying the beneficial ownership of investment vehicles (even those formed offshore). By building data networks that increase investor transparency, RegTechs promise to take the guesswork and relative risk out of doing business with a new customer in a new jurisdiction.

Likewise, RegTech solutions can help marry two related and increasingly-important regulatory functions: KYC data collection and suitability analysis. Not only can they facilitate and automate the collection of critical KYC information directly from new customers and from third-party data networks, compliance management solutions can also parse that information and derive insight about whether an investment strategy fits an investor’s profile and long-term objectives. 

Finally, RegTech continues to develop new and better ways to streamline compliance reporting. Existing and emerging solutions generate reports automatically, making filing much more efficient. Increasingly, RegTech delivers value for wealth managers by developing tools that recognize and flag issues (trading patterns, capital flows, etc.) that will likely attract regulatory scrutiny, giving firms the opportunity to tackle a thorny problem before an inspector from the SEC or FCA comes calling.

READ ARTICLE: Exam Time? Tips from a Former Regulator on How to Prepare


Speeding Up and Adding Precision To Rule-Making

The same compliance automation solutions that help asset managers understand and comply with regulations will also soon be put to use crafting and testing new regulations. New technology will help eliminate the vexing problem of inconsistent or contradictory provisions by giving regulators and other stakeholders the ability to see an entire body of regulations from “30,000 feet” and to model how changing regulatory text here will have an impact on obligations over there. They will also create a more streamlined process of collaborative rule-making, linking all stakeholders together and giving them the tools to track and analyze proposed amendments in real-time.

In facilitating insight, efficiency, and collaboration in rule-making, RegTech solutions also hold the promise to do something greater: they will help develop regulators develop rules that actually address market conditions as they exist at the time of a final rule issuance, instead of the conditions that existed when the lengthy rule-making process began (but have since evolved). This will in turn allow for less costly, more precise rules, eliminating market inefficiencies that result from overbroad rules that throw the proverbial baby out with the bathwater by inhibiting legitimate investment much more than they prevent illegitimate practices. 

READ ARTICLE: Ascent Selected by GFIN for Regulatory Cross-Border Pilot


Ascent Leads the Way

At Ascent, we strive to develop regulatory change management and compliance management solutions that free wealth managers and other financial industry professionals from the time-consuming, expensive task of regulatory compliance, so that they can do what they do best: build relationships, develop business, and implement the wisdoms gleaned from their technology backend.

LEARN MORE: Click here to learn about Ascent Solutions.


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