An opportunity for financial institutions to know their clients better and enhance their services
Coping with strengthening regulations in the financial industry usually resonates with words like “costly”, “deadlines”, “fines”, or “operational nightmare”.
Many financial institutions deal with these regulations through short-term / tactical solutions rather than long-term / strategical choices, because of short deadlines and strong constraints. They end up accumulating a “technical debt”, adding bricks on top of processes and infrastructure that will not live up to the next regulation and are painful to maintain. But things are starting to change.
Mifid II (Markets in Financial Instruments Directive) – and the hot topic of suitability – is a good example. Regulations evolve along with investors’ expectations, and there is room to enhance client service in the wealth management industry, in particular around proactive advice, communication and transparency. More and more private banks are choosing to leverage what seems to be a costly constraint into an opportunity to offer differentiated services and grow their client base by:
- turning portfolio risk monitoring (suitability gap analysis) into proactive advice and qualified opportunity identification,
- using regulatory suitability assessment as a powerful communication support for relationship managers,
- leveraging the investment in the short-term regulatory requirements to improve the IT infrastructure and automate processes on the longer term.
Regulations will generate more and more data with highly valuable information regarding clients’ needs and behaviors. Making this information “consumable” – i.e. turning regulatory data into smart data – and creating processes to leverage this information are key challenges for the financial institutions to make the most of the industry mutation, know their clients better and enhance their services.