Fiduciary Standards

Reconciling Regulatory Compliance: The Key Role of Digital

Wealth managers, insurers, advisors and banking businesses operate in one of the most highly regulated sectors in the world: the financial services sector. While making sure to attract new customers and grow their business, financial services businesses are in fact required to strictly adhere to a growing number of rules and regulations that in the last few years have become increasingly complex and cover areas like ESGs, transparency, data security and cryptocurrency.

In its “mission of protecting investors, maintaining fair, orderly and efficient markets and facilitating capital formation”, the US Security and Exchange Commission (SEC) is currently considering introducing climate risk disclosure and ESG related claims, that will require collection and management of large amounts of data. In the US, investors and wealth managers also need to take into consideration increased income tax rates for high net-worth individuals, announced by the Biden administration , that will likely exacerbate an already challenging outlook.

To make things worse, the regulatory landscape tends to be geographically fragmented and in constant evolution. Changes have already taken place in the EU, where higher standards on disclosures and new requirements to report adverse investments’ impact on social and environmental issues have been set with the introduction of the Sustainable Finance Disclosure Regulation (SFDR), effective since March 2021. Significant regulatory shifts are also expected to take place in Japan, Canada, Benelux, Australia, US and France, making wealth managers’ operating scenarios look incredibly complex.

In its latest report, Wealth and asset management 4.0- How digital, social, and regulatory shifts will transform the industry, ThoughtLab collected wealth management professionals’ views finding that 55% expect data privacy to be the top area for regulatory change in the next two years, closely followed by cybersecurity (50%) and other fintech-related regulation (36%). All these areas have a significant impact on data collection and management, where there is a high risk of human error. As a result, wealth management businesses will need to closely reassess the way advisors and back-office employees collect and process costumer information.


Data management should not be underestimated, especially as it is essential to weave regulatory compliance seamlessly into the high-end service of private wealth management. Advisors are in fact required to ask customers to fill out extensive documentation to build their profiles and ensure transparency. This can be a tiresome and complex task for clients, that can rapidly escalate into irritation, if they need to repeat the whole process due to avoidable minor omissions or mistakes. In addition, clients are often required to input the same data, such as an address, at every compulsory regulated review; it’s clear that data collection and verification pose a very real threat to customer experience.

1 EY, Tax News Update

Opting for greater automation and compliance by design can avoid a lot of headaches, however, as the risk of human error, from an illegible file to an accidental omission is directly linked to carrying out data entry processes manually.

It is clear then that to remain competitive wealth managers need to stop relying solely on manual and legacy processes, email or phone. Introducing new flexible solutions, that allow wealth managers to digitalize and automate lengthy processes, such as client onboarding, will help guarantee a precise and secure data collection processes. Automation can also help achieve a high compliance level and ensure companies are ready to deal with future regulatory changes quickly and efficiently, without impacting client engagement.

Digital solutions, that can be easily tailored to respond to specific geographical regulatory needs, are now more essential than ever if wealth managers wish to deliver a seamless customer experience, to increase transparency and to improve the auditing processes. These solutions are also instrumental in reducing frustration and the risk of error, in ensuring the high standards required by investors and regulators are met without fail, all while improving customer experience.

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