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The rise and rise of RegTech Compliance is changing. As regulatory, cost and staffing pressures on wealth and asset managers increase, firms are increasingly looking to exploit the transformative potential of regulatory technology (RegTech). EY’s Technology Pulse series for Asset Management We worked with a broad selection of asset managers from across the full spectrum of the UK market to understand how they are using RegTech and explore what impact it will have on their businesses. We asked participants to define RegTech in their own words. The vast majority of managers took a positive view of the potential for RegTech to deliver efficiency, auditability and automation. Q: What does RegTech mean to you? Most firms are using RegTech only within narrow point solutions for specific regulatory requirements (e.g., transactions reporting). Firms with more mature RegTech programmes are increasingly focused on broader capabilities, enabling teams to work in more efficient and intelligent ways through golden sources of data, predictive analytics and exploratory dashboards. Q: To what extent is your business using RegTech? To be successful, we must partner better — in the business and across the broader industry. “ ” CTO, global independent asset manager LITTLE LOT MEDIUM We need to move beyond focusing on individual regulations, and think to the future. Firms that are reactive will struggle, those that are adaptable will reap rewards. “ ” General Counsel, FTSE-250 independent asset manager While the majority of respondents identified compliance as the ultimate owner for RegTech, those with more established RegTech programmes prioritise cross-functional working, often with dedicated support and close interaction with technology. Q: From a business perspective, where does ownership for RegTech sit? There was no consensus regarding leaders for RegTech. Managers identified a plethora of technology firms focused on point solutions and identified a need for consultants and advisors to act as arbiters and gatekeepers. Respondents were broadly positive on regulators' involvement in the RegTech discussion, with a number actually highlighting them as driving the conversation. Q: Who is driving the agenda for RegTech? Q: What do you see as the top three immediate opportunities and challenges for RegTech? The opportunities identified by respondents reflect a focus on meeting enhanced regulatory expectations in an environment of sustained cost pressure. However, managers with more advanced RegTech programmes were more likely to highlight transformational opportunities such as predictive analytics, and the use of pooled or co-ordinated investment in new capabilities to enhance cross-line of defence (LoD) working. By far the most common challenge identified was of integrating RegTech into legacy operating models. Respondents highlighted immediate concerns around data and technology, particularly the duplication of effort through implementing point solutions. Over the longer term, some managers highlighted a people change risk, with a need to retrain staff and a shortage of high-quality talent in the market. RegTech is playing an increasingly important role. Firms recognise the value of automation and efficiency, and increasingly buy in to the broader opportunity to strengthen the role of oversight functions within the business and to improve cross-LoD operations. They also note the need to meet growing regulatory expectations for the enhanced capabilities that RegTech brings. Some significant practical challenges remain, particularly the difficulty of integrating legacy architectures, silos between the business, compliance and IT, the dominance of point solutions, and an aversion to brand new technology. Nevertheless, it is also clear that those firms which embrace RegTech are likely to derive significant benefits far beyond core compliance activities. “ ” CCO, global asset manager 1 2 3 1 DATA PRIVACY Chosen by 69% Of which, first choice of 33% 2 3 For me it boils down to this: RegTech is an opportunity and, increasingly, regulators come to expect it. There are challenges, but we need to make it work. “ ” CCO, global asset manager The immediate challenge is one of ownership. Who is accountable and how do we work across silos? Over the medium term, the key challenge is one of people. “ ” Director, global investment manager What it all means Further information: Ben Lucas Partner, UK Wealth & Asset Management [email protected] +44 (0) 20 7197 9351 ey.com © 2017 Ernst & Young LLP, 1 More London Place, London, SE1 2AF. Published in the UK. All Rights Reserved. EYG no. 04633-174Gbl Compliance Business Technology Cross-function 12% 9% 18% 55% 18% 17% 24% 17% 30% Regulators Consultants Others No one We speak to RegTech firms on a weekly basis — our difficulty is sorting the wheat from the chaff.
