- James Wartho
How Fifth Logic iQ enhances regulatory compliance in the wealth management industry
Increased compliance scrutiny to meet new standards
Over the last few years, Australian financial institutions and lenders have come under increased scrutiny from government regulators. The Banking Royal Commission brought the banking, superannuation and financial services industry under the microscope and raised the regulatory stakes for those who operate within this sphere.
As a result of The Royal Commission's final report, many banks, including Westpac, are still trying to divest their financial advisory arms, to mitigate the reputational risk associated with new lending and product advice regulations.
What are the results of these changes in the industry?
These changes have created a fragmented industry which is becoming more difficult to regulate and finding it much trickier to meet compliance standards.
So, with all these rapid shifts in regulatory compliance, how can finance and wealth management organisations make it easier for themselves to safeguard their names and provide a sound service that meets these rigid new standards?
Fifth Logic iQ (FLiQ) meets these challenges head on, providing a clean, efficient way to access and analyse both structured and unstructured data, helping financial organisations with simplified reporting and placing them in a much better position to handle these stringent regulations.
Challenges facing financial advisory and wealth management services
Currently, every organisation that offers financial or wealth services (and other financial advisory services) are being asked to do better. How they should do this is not clear.
Accelerated regulatory change and intensified scrutiny means that organisations need to find better ways of collecting and analysing their data in real-time. As it stands, previous methods simply cannot keep up with this demand.
Why are current systems unable to meet the demands of intensified scrutiny?
The data for complying financial advisory teams is often spread across the organisation and is rarely easily accessible. For example, often unstructured data is located on a tape drive, or in the case of voice data is not captured at all. Even if the data can be brought into one place, the task of investigating that data to draw relevant insights and actions is daunting. Most organisations take a sampling method (e.g., 1 in 100 transactions are reviewed) to protect against unsound advice and potential corruption. This approach is fraught with danger in today's highly regulated environment.
In the event of a regulatory incident, organisations must trawl through years of historical information to look for non-compliance. A common ask from regulators is “tell us anything suspicious that has happened in the last 5 years”. A very subjective and challenging request for any organisation.
But on a day-to-day level, what else inhibits advisory services from meeting these ever-evolving codes of practice?
Detailed notes of meetings and consistent file management are key requirements to complying but are a significant drain on time. This task is not a strength for many financial advisers and often variation exists in file notes across advisers exposing the client, adviser and organisation to risk and future issues.
Staying on top of the myriad of new regulations is proving to be an overwhelming adjustment for many within the industry. Ensuring that compliant advice is given to the right person has become more complicated and difficult to understand.
Client approved file notes and disclaimers must now be legally recorded. Any further issues that arise must also be reported and documented. With much room for human error and potential to miss-sell. Maintaining a real-time account of this information is essential for data integrity and compliance – yet it is often difficult to achieve.
Choosing FLiQ as your data collection platform
FLiQ streamlines the ingestion of data, analysis, and evaluation, giving advisory services all the power they need to manage increased reporting requirements and simplify their data compliance.
In years gone by, the randomised sampling method has been used to monitor about one out of every hundred interactions, leaving holes in the system, and inviting the potential for increased misconduct amongst financial advisors.
This amount is akin to checking your rear view and side mirrors once every hundred minutes while driving through peak hour traffic – it is not safe and is a high-risk approach.
FLiQ removes this opportunity for error by looking at all transactions in real-time. This gives your organisation complete coverage as it happens instead of occasional sampling well after the damage has been done.
And while regulators call for higher company spending on analysts just to listen to calls, FLiQ removes these unnecessary costs by automatically checking data in real time across all platforms. Here is a detailed look at the benefits of choosing FLiQ:
1. Simple implementation
With FLiQ, wealth management services can have their data on a platform with a system up and running in a matter of weeks. Using advanced data fabrics and dynamic schema technology, FLiQ brings down both the time and cost of the implementation process.
2. Whole of data insights
FLiQ pulls in whole-of-data from a wide array of data platforms used by your organisation. You may have mobile calls, Teams/Zoom calls, CRM information, account information, transaction information all relevant to complying your adviser force. FLiQ can process this data in real time to give you relevant and immediate compliance insights and actions for your advisory team. It can also collect and analyse product disclosure statements to include critical client policy and transaction information (superannuation/loan transactions etc).
3. Real-time prevention
Real-time data analysis increases the chance of preventing falling foul of regulations before it occurs. Incorrect advice or misconduct could be picked up straight away, reducing the cost of searching for it later and mitigating any future reputational risk.
Achieve better results with FLiQ
As FLiQ checks every interaction and not just one out of every hundred, wealth management services, banks and financial services can quickly discover and resolve any compliance issues as they happen, not months down the track.
This real-time analysis is critical in verifying all necessary client information (names, dates, accounts), ensuring no missteps or breaches of government regulation.
As an added benefit, improving compliance normally boosts productivity in the adviser force by automating tasks such as file notes.
Future proof accountability
FLiQ is a tool that can be used by any industry within the financial services sector to raise awareness of breakdowns in compliance. It reduces the opportunity for misconduct and holds the entire industry accountable for any misleading or incorrect information that may harm vulnerable clients. For financial advisors or wealth management service providers, this is the easiest way to identify individuals or group financial mismanagement, while avoiding any larger scale and unnecessary reputational damage.
The platform is currently being piloted by banks, insurance companies and superannuation organisations, via the iQ Accelerator program.
The Fifth Logic team now have three more spaces on the iQ Accelerator program for organisations interested in piloting a powerful engine with infinite data processing capabilities. Check out the details and register for the iQ Accelerator program today.