Integrated compliance solutions: Compliance-By-Design and why does it matter?
by Jan Aage Skaathun, on 30 May 2023 10:10
According to Boston Consulting Group, compliance by design means:
“Applying a systematic approach to integrating regulatory requirements into manual and automated tasks and processes.”
Compliance-By-Design, also referred to as integrated or embedded compliance, is at the core of enabling companies to efficiently navigate regulatory requirements.
In this post we will highlight 4 reasons why integrated compliance is vital for modern investment advisory, and how Quantfolio is enabling Compliance-By-Design with the in-built functionality of our advisory platform.
The importance of integrated compliance solutions
Given the current and anticipated frequency of regulatory updates within the already complex domain of investment advisory, we see the capability of integrated compliance solutions as crucial to be able to successfully scale operations whilst containing risk and costs. Failing to apply integrated compliance solutions in investment advisory technology will place companies at a serious disadvantage going forward. Below are 4 reasons why companies need integrated compliance solutions.
1. Regulatory Complexity
Changing policy and regulatory requirements are increasingly pressuring the investment advisory industry to innovate on well-established processes. The mandatory sustainability assessment in the advisory flow has introduced a whole new regulatory theme both for investors and advisors. Implementation of new compliance demands in the processes is a competitive capability measured on speed and quality. In a matter of a few years, the EU and UK have gone live with multiple comprehensive regulations such as MiFID II, SFDR Level 1 and Level 2, closely followed up by the Consumer Duty in the UK and EU Retail Investment Strategy. All of those regulations feature heightened levels of investor protection, data disclosure, along with new regulations and standards on sustainability. A technology that supports evolving advisory practices at the same pace as new regulations are published is essential for companies' reputation, position among competitors, and further growth.
2. Proactive risk management
Integrating compliance into the design of an advisory framework promotes strategic risk management. By embedding systematic compliance controls and monitoring processes from the outset, firms can identify and address potential compliance risks before they escalate. Financial technology and compliance-by-design allows live detection of issues and prevents violations or non-compliant behaviour that could harm clients and the firm's reputation.
3. Cost efficiency
Building compliance capabilities into the advisory software as system default results in long-term cost savings. Traditional approaches often involve retroactive compliance measures, reactive responses to regulatory changes, and manual processes. By contrast, an integrated compliance framework automates compliance procedures, streamlines operations, reduces manual errors and minimizes the need for costly remediation efforts.
4. Enhanced Client Trust
Clients entrust their assets to investment advisors with the expectation that their investments will be managed in compliance with applicable regulations which are clearly made understandable for them. An advisor's duty, in addition to following compliance, is to ensure that the regulatory jargon is simplified and made consumable for the investor. Breaking down the barriers for investors and creating an engaging advisory experience is now an expectation supported by upcoming regulations. Failure to avoid investor's confusion and uncertainly in the advisory process produces mistrust. An integrated compliance approach helps establish a culture of trust by demonstrating that the firm prioritizes compliance and places clients' interests first. It can enhance the firm's reputation, attract new clients, and foster long-term client relationships.
An integrated compliance approach enables firms to stay ahead of regulatory developments by incorporating flexibility and adaptability into their systems and processes. This helps ensure compliance with evolving regulations and minimizes disruption caused by changes in compliance requirements, and in essence, future proofing their process.
Quantfolio's integrated compliance solution
At Quantfolio, safeguarding existing and future regulatory alignment is of utmost importance in our platform's development, as it significantly aids financial institutions in reducing costs and mitigating risks within their investment advisory operations. This means that we develop the advisory platform in alignment with international and local regulatory demands, and with the flexibility to adapt thresholds according to the specific requirements of the client's compliance department. Compliance requirements serve as prerequisites for the development of new functionality on the platform, with a systematic technology approach to prevent non-compliant behaviour.
With Quantfolio’s award-winning technology, we make a real difference for our clients to safeguard regulatory compliance, as demonstrated by the following quote from one of our clients:
“I really like the fact that as soon as the investment proposal has been generated, everything is in order and compliant”
Head of Savings and Investments at SPV
Learn more about how we helped streamline compliance for SPV, among other things, with our platform. Alternatively, discover full capabilities of our Deep Alpha Platform, or contact us to get started with our integrated compliance solution.