How to provide hyper-personalized investment advice under increasing regulatory pressure?

by Jan Aage Skaathun, on 05 September 2023 12:12

Hyper personalisation has quickly become one of the most important aspects of the digital world. Research claims that 64% of millennials and 51% of investors aged between 35 and 54 are willing to pay more for personalised investing products and services.

next generation investor looking at computer screen

With such attractive stats, it is no surprise that firms are increasing their efforts to provide personalized INVESTMENT services. At the same time regulations pressure is only increasing and adhering to regulatory demands becomes more and more challenging.

Why compliance-by-design is such an important trend in wealth management?

To cater for both hyper-personalisation and compliance, investment firms need a systematic approach to integrating regulatory requirements into their processes. As advisors deviate further from the established norm, the challenge of adhering to the dynamic regulatory landscape becomes increasingly intricate.

As to why this is such an important trend, Quantfolio CCO and co-founder Jan Skaathun explains: “The most undesirable scenario for a wealth management firm involves the potential loss of its license due to erroneous advice provided to clients. Even in less severe instances that don't lead to complete license revocation, there is still the risk of major reputational damage. For instance, consistent patterns of advisor behavior at odds with expected norms might attract regulatory attention, resulting in public reports damaging the firm’s reputation”. And regulatory bodies are increasingly stepping up their focus on the investment advisory sector and their practices in their auditing activities.

Another potential problem facing firms is selling investment products to clients that do not fully understand them. Skaathun emphasizes that if a wealth manager offers intricate products like alternative investment funds, supplementary documentation is imperative to grant investors access, given the complexity involved. Failure to meticulously document this process and subsequently offering such products to inadequately informed clients can result in significant issues.

Skaathun further elaborates: “And here compliance-by-design kicks in because the logic of the platform supports that the client will not have access to these products if he didn't qualify for them previously in the assessment process. The system will not allow it because there's a breach in a compliance flow. And if the client still wants access to something, then you have training modules built in the platform, so that the advisor can actually train the client to receive the required knowledge, and this is documented in the system that you have gone through the training exercise and the client demonstrated the necessary knowledge and understanding.”

How does an embedded compliance-by-design solution differ from just having digital compliance tools?

Bjørnar Mundal, Chief Product Officer at Quantfolio, clarifies: “We obviously don't offer a standalone compliance tool. Our offering is a comprehensive wealth management platform with compliance by design logic integrated into it. If you have the compliance rules embedded in your tools, it's easier to ensure that any additional choices or personalization options of the investor are within the risk and the preferences of the client are met. This doesn't replace the compliance department's role; they continue with their daily responsibilities. However, their time can now be focused on actually productive things rather than just checking documents for human errors.”

What is holding wealth managers back from implementing software solutions with integrated compliance?

Some of our potential customers have other focus areas at the moment, they might be in the process of altering their core systems, portfolio management systems, or just too busy putting out the fires because they don't have the system in place to safeguard against those fires. Most often, the latter is the key reason: because of the fragmented processes the firm just doesn't have time and resources to really deliver on innovation.

Skaathun summarizes: “I believe it's imperative to pause, evaluate one's approach and see that you can do things in a totally different way. However, in the midst of daily operations it's hard to find the capacity to even think about changing and improving. Yet, the ones that do are really the ones that will be the winners.”

Quantfolio solution.

Quantfolio offers a comprehensive wealth management platform with compliance by design logic integrated into it. Let us show you how it works? Book a demo and we shall go through the solution with you. 


Quantfolio is the Nordic market leader in terms of offering hybrid digital investment advisory technology for major banks and WM’s. Its software supports order execution, advisory and discretionary investment management with integrated compliance logic. Quantfolio has won several awards and is included among the worlds top 100 WealthTech providers.