Compliance pressures mount for wealth managers

The compliance issues surrounding Wealth Management firms could hardly have passed those in the industry by. The importance of Know Your Customer information remains paramount to industry guidelines in order to ensure the consistent suitability of client portfolios. But a simple pre-requisite of this is that customer files must be managed effectively – an area which has seen numerous and continuous failings over the past year.

Despite the fact that there are clear guidelines in place from industry bodies, regulators and the wider industry community, many Wealth Management firms have been found to be holding inaccurate, out-of-date and even incomplete records about their clients. In December last year, a review by the FSA highlighted significant and widespread failings of many firms in keeping records that meet the required standards – a pattern that may well be echoed across the industry and is a concerning prospect for industry bodies and clients alike.

Firms are experiencing greater and greater compliance pressures - FATCA, Suitability, Anti Money Laundering and other pressing legislative and best practice imperatives continue to crowd in.  Processes, systems and structures must be in place even if companies already have this information. But there is a question of accuracy and completeness – are these records kept up to date? – and are they secure? – can they be accessed? The quality of records is imperative to the appropriateness of client portfolios and activities. After all, as the FSA found, without accurate records in place, there are often discrepancies between portfolios sand clients’ attitude to risk and their investment objectives.

Complacency is not an option when the consequence of failing to comply can be huge – e.g. a fine of up to £5,000,000, as well as the potentially calamitous reputational fall out. In order to avoid such stings, Wealth Managers need to have a system in place whereby firms can update their records quickly and accurately, as well as providing ready access should this be necessary to meet regulatory requirements.

Could Churchill & Direct Line’s £2.17m FSA fine have been avoided with better systems? Oh yes…

 ‘FSA imposes £2.17 million fine for failure by Direct Line and Churchill to conduct their businesses with due skill, care and diligence’
http://www.fsa.gov.uk/pages/Library/Communication/PR/2012/003.shtml

The Financial Services Authority (FSA) has imposed a fine of £2.17 million for failings by Direct Line Insurance Plc and Churchill Insurance Company to prevent files that the FSA had requested from being improperly altered.

In collecting the 50 complaint files for review, the FSA found 27 of the files were altered before submission, due to the firms failing to act with due skill, care and diligence. 

The failing for which these insurance firms are being penalised is clearly inappropriately enabling staff to alter files. This kind of alteration can largely only occur when files are stored without sufficient versioning control. In itself, this is a huge downfall, more so when an audit trail is required. For legally admissibility purposes document and content management applications make this impossible. 

Manually archived documents are not afforded the same security as those which are electronically available. For a long time, we have been professing that a document management system provides an indisputable record for files and as such a key element, and typical requirement, of this system is immutability – once an item is entered into the system it cannot be altered under any circumstance, and it seems that those within Direct Line and Churchill would have done well to have implemented such a system. 

Working with previous clients in the Financial Services arena has given us a full appreciation of the variety of needs that such organisations have. The main requirement is usually the ability to provide a clear audit trail of every single document – essential in order to comply with FSA requirements. Through using a document management system, the software enables all of the business content to be rigorously controlled and yet also easily shared, with the ability to administer security controls of various strength determined by the document itself. 

The main point associated with it is that once in the system, documents simply cannot be altered. This in itself that would have saved these two insurers a lot of trouble, and cash.

Customer service – is it really so important?

We think so.... with the proliferation of feedback sites, “your view counts” widgets and review pieces available on the web, the old adage that the customer is king has never been more true. Do right by the customer and your advocates will directly impact not only your reputation but also the health and future of your organisation. There’s research which measures and proves just how important this link is and intrinsic to this is customer service. This is of interest to Invu simply because in the course of the last two years or so we’ve been assiduously taking soundings from our customers in the shape of case studies and testimonials. We deliver document management based business solutions and in many, many cases the most striking benefit we hear is the genuine improvement in service to customers, clients and suppliers. And it’s across a range of sectors – from professional firms to manufacturers to social housing providers amongst others.

It’s this background which has made us consider the importance of customer service. Our latest whitepaper is dedicated to the topic and the background research has thrown up some compelling information – sure, some of it is a little long in the tooth, but if anything, with today’s more canny customers and greater access to information, aren’t the principles more likely to be exacerbated.

We’ve highlighted a number of areas where what we do correlates with those customer service actions which directly deliver ROI and business growth. This is terrific validation and we’re delighted to see the overlap. More widely though, for all business it does shine a light on the need to be competitive and to do right by your customers. Is your organisation able to deliver great service, to create a “wow” and to see things from the customer’s viewpoint? According to the Harvard Business School and the Institute of Customer Service anything which contributes to your ability to do so will deliver reputational, brand and financial benefits.  

There’s more detailed in the whitepaper - “The importance of customer service to your organisation’s future” – download it here 

We hope it gives you food for thought.