New legislation covering suitability and other types of investor protection is hitting the statute books all over the world, providing a significant compliance burden for financial firms.
One such piece of legislation is The Markets in Financial Instruments Directive (MiFID II) which comes into effect on 3 January 2018. Among other things, MiFID II introduces enhanced provisions around suitability and significantly tougher obligations for record-keeping, requiring firms to retain records for longer and keep comprehensive records of all client communications.
While MiFID II and other new rules undoubtedly introduce new compliance costs, we do not believe that they should be seen just as a compliance exercise. With the right technology, we see an opportunity to achieve competitive advantage.
During the "Turning compliance into opportunity podcast", we present three MarketPlace providers, all integrated with the Temenos WealthSuite, that can help you turn compliance into market opportunities.
Qumram provides a solution for recording customer communication over digital channels, including social channels such as Whatsapp. The sessions are recorded in movie-like high fidelity and can be replayed at a moment's notice, giving an exact replica of the activity that occurred and so providing indisputable evidence in accordance with regulatory requirements. But the real value-add is that, as well as compliance, the data derived provides analytics to optimize sales and marketing efforts such as improving user journeys and producing more relevant content. In addition, it shows RMs what services clients have been viewing as well as what origination processes have been abandoned, information which can be configured with RM workflows to prompt next best actions.
EdgeLab takes advantage of cutting-edge technologies and the most advanced statistical models to derive the true risk of any asset based on thousands of risk factors. In the context of suitability regulations such as MiFID II, EdgeLab is able to determine product risk classification precisely at both the portfolio and instrument level across all asset classes and currencies to ensure client funds are invested appropriately. Further, it monitors continued suitability to ensure that risk never exceeds what is appropriate owing to changes in market or other factors. Lastly, in addition to giving the peace of mind of continued compliance, the solution optimizes portfolios, identifying and correcting weaknesses in portfolio composition to maximize risk reward with lower risk.
Neuroprofiler, which emerged from the Temenos-sponsored Fusion incubator, applies gamification and behavioural science to financial services. In the context of suitability regulations, Neuroprofiler provides a web-based game which takes clients roughly 10 minutes to complete and which immediately establishes their risk categorization, matching them against more than 1 million client risk profiles. The solution ensures compliance more accurately and more quickly than paper-based questionnaires. But, on top, it provides an enormous amount of additional information about client behaviour and preferences to help the RM to cross- and up-sell as well as to improve services levels.