During the last couple of months we arranged a breakfast seminar tour in three different countries, discussing the current and upcoming regulatory issues in the EU region. The team at FA Solutions and our visitor speakers from PwC want to say a huge thank you to our customers, partners, and contacts for joining us and making our breakfast seminars, once again, a great success. To sum up the key learnings from the seminar series, we sat down for a quick chat with our great speakers.
1. Financial services are facing multiple regulative challenges within the next years. One of the biggest changes is MiFID II, which is only 9 months away. It’s a game changer that makes financial advice and investment management more complex than ever before. What kind of changes MiFID II is bringing to customer relationship management in financial services companies?
“Customer protection is in the core of MiFID II, fulfilling the gaps left open by MiFID I. This brings in a variety of needs to track and trace processes and to prove that they are resulting the best possible outcome from the customer’s point of view. Basically, you need to find out client’s needs, objectives and characteristics, based on that offer only suitable advice and products, and do that in a manner that results the best possible outcome for the customer. This requires increased transparency for the entire customer journey from onboarding to fee collection and trading. In the UK, a similar regulation is already effective, and just currently an advisor was fined after advising their customer to invest in stocks instead of paying their credit card loan, due to a lack of sufficient background information”, exemplifies Helén Jensen, Senior Manager at PwC Finland.
2. MiFID II brings also a bunch of new requirements for transaction reporting, trade compliance and best execution procedures. How can an asset manager take these requirements into practice?
“Currently asset managers need to report 24 fields about transactions. MiFID II/MiFIR will increase this requirement to over 60 reported fields. A new requirement is for example the need to identify the one making the decision of a certain trade and those who carried out the execution, such as a portfolio manager, a trader or an algorithm. This may prove complex for Discretionary Asset Managers where a rebalancing of a Model may produce thousands of trades. Traceability becomes more important than ever. Moreover, you need to always find the best execution venue for your customer, and justify that, while also taking care of individual customer-specific portfolio limits, pre- and post-trade. And these are just some of the new requirements seeking to increase transparency and customer protection.
Fulfilling this requires that your software can flexibly track and save a variety of information and aggregate that information into reports, workflows, and different kind of dashboards to monitor e.g. compliance checks, AML and so forth without requiring massive manual work. It is in reality impossible to efficiently fulfil the new regulatory requirements without a flexible and modern technology that enables automation”, emphasizes Richard Nordin, Sales Director at FA Solutions. “The role of technology in the financial industry is constantly increasing, but accelerates with MiFID II. Waiting is not an option.”
3. In addition to regulations effective in the financial industry, General Data Protection Regulation is coming in May 2018 reaching all companies that are collecting any customer data within EU. What are the next steps companies in the financial industry need to consider regarding GDPR?
“GDPR sets restrictions for customer data collection and usage, but at the same time regulations in the financial industry call for increasing knowledge of customers. Definitely an issue for companies is to find a balance where these regulations conflict. From GDPR point of view, what is important now is to consider how you, your process and systems you have in use, are able to map where the customer data is stored, hand over automated customer data by request, and completely delete (‘forget’) customers when required. Many of the companies also need to assign a Data Protection Officer, and be able to notify relevant parties quickly enough after possible data breaches. Sanctions set for GDPR non-compliance are significant, so companies are taking this remarkably seriously“, comments Sami Toivoniemi, Senior Manager in Risk and Regulation in PwC Finland.
“GDPR is setting enormous demands for companies handling customer data. However, GDPR should not be seen only in a negative light, as it also makes it easier and safer for individuals to submit personal information to service providers. In other words, GDPR provides greater opportunities for businesses to obtain information about their customers, which in turn can be used to provide customers with more targeted and better offers – resulting a value exchange between customers and companies. By GDPR we are moving from outdated restrictions to new opportunities for an easier life for all of us as citizens and consumers in a digital society”, envisions Lars Erik Fjørtoft, Partner and Head of IT Risk at PwC Norway.
4. What are the benefits that asset managers can gain from PSD2, and how to achieve those?
“PSD2 brings great opportunities for asset managers to get and collect account information from banks. When an advisor, whether it’s a human or a robo, has a permission from the customer to get his data, he can make more precise advice and offering together with the KYC process, and enables avoiding situations like Helén just exemplified. By its nature this requires that asset management systems support modern APIs to communicate with banks APIs”, adds Hannes Helenius, Partner and Chairman of the Board at FA Solutions.
5. Norway being a non-EU country, how Norwegian companies are reacting the tightening EU regulation?
“All of these EU regulations will also be implemented in Norway, either in the same or slightly later schedule than EU countries. Therefore, it is or at least should be in the agenda of Norwegian companies to take the changes seriously and prepare to the changing regulatory environment. Quite a lot of Norwegian companies have operations also in EU, which requires them to be precisely compliant in the EU schedule. When implementing new processes and systems in their EU operations, it is in most of the cases wise to implement them simultaneously in Norway to avoid the last minute panic”, adds Daniel Næsse, Lawyer at PwC Norway, about the situation with the non-EU country Norway.
Thank you for coming and we hope to see you soon again!