The Model Office Blog

“Business is no difference to sport, data and technology is a very powerful tool, but only if every individual in your team knows how and why they are using it” Sir Clive Woodward England Rugby world cup winning manager

At Model Office we love sports analogies and we would recommend any business who either believes in data analytics or not read or watch Moneyball, an account of Oakland Athletics baseball team’s 2002 season and their general manager’s attempts to assemble a competitive team. The story focuses on the adoption of a ‘sabermetric’ system that employs quantitative diagnostic technology to collect and summarise relevant data from game activity.

This data can measure and predict performance trends and showcase players who are most suited to influencing how a team wants or needs to play to win.

Why is this relevant to financial services I hear you ask?

Well the rule book demands a certain standard of performance as do clients and yes business stakeholders. We are witnessing a digital revolution, some call it the 4^th industrial revolution and this provides retail investment advice firms, networks and support services to employ data analytics and diagnostics so they embed an evidence based practice and can assess behavioural trends such as individuals and firm competence, conduct and how this influences their culture and clients. Great for compliance with the Senior Managers and Certification Regime (SM&CR).

The results for a business who does employ such technology can be impressive. RegTech alone can offer high level and granular analysis of how firms governance, risk and compliance management processes are effecting performance. The FCA’s 5 Conduct Questions Programme showcases that firms who monitor and manage compliance risk management create a constructive culture which has a positive effect for sustainable professional performance.

How can RegTech help?

Utilising diagnostic technology can help market participants due to:

• Increased evidence to showcase good practice that can help reduce regulatory levies such as professional indemnity insurance (PII) and streamline audit practice saving time and costs
• Technology integration where application programming interfaces (APIs) can enable tech to ‘talk’ and data share and deliver streamlined regulatory reports across key areas such as:
  • Client data quality
  • AML/KYC/PEP sanctions
  • PROD and Client Segmentation ensuring;
    • Services and products are suitable for end client needs
    • ESG analysis to assess client needs and objectives
    • Vulnerable clients are identified and provided the correct services
  • Assessing missing information from client valuations
  • AI text analysis to auto-audit compliance policy documents and automat client file reviews
  • Advice suitability checks identifying underinsured or underinvested clients
  • Assessing adviser supervision and adviser training and competence requirements
  • Ensuring Investment, Mortgage, Insurance advice is compliant with COBS, MCOBS and ICOBS
• Self-Audit and aligning business models with the regulations ensuring firms know they comply and assess and rectify blind spots and weaknesses
• Increase Management Information (MI) and cut time and costs associated with compliance
• Move away from ‘swivel chair’ compliance where disparate solutions (mainly spreadsheets) are used, to a single source SaaS or Cloud based dashboard providing heatmapping, AI algorithms to highlight trends and produce streamlined reports

One message that the FCA presents in their business plans is that both financial services providers, networks and support services plus the bodies that regulate them must act to adapt to, and enjoy the benefits of, technology and innovative approaches. This takes courage and a medium-long term view so the real benefits that RegTech can deliver more cost and time efficient practice than current strategies.

Back to sport, you only have to look at examples such as Sir Clive Woodward’s excellent speech at the PFS 2017 Festival of Financial Planning at how important it is for business to adopt and embed analytic and diagnostic technology into their everyday practice. This way they will have all the evidence as to how to ensure sustained professional practice and win!

So, with such benefits in a changing market, the question has to be asked: ‘RegTech, if not now when?’.