EY RegTech survey finds opportunities for asset managers

Asset Managers are increasingly embracing emerging regulatory technologies, known as RegTech, to meet enhanced compliance obligations, according to a new survey published by EY, the professional services firm.

Ben Lucas, a partner in EY’s Wealth & Asset Management practice, reveals that “we have really seen a step-change in adoption of RegTech over the last couple of years, both in terms of regulatory expectations worldwide, and in the sheer proliferation of RegTech start-ups.”

Respondents to the survey, representing the full spectrum of the UK asset management market, consistently identified increased automation, efficiency and auditability as key drivers for investment in RegTech capabilities. “From managers’ perspectives, there is real excitement around the opportunity to do more with less,” says Lucas, “and this reflects the greatly-enhanced obligations placed on compliance functions by regulators and Boards.”

The results of the survey show a spectrum of adoption, between firms that are focused on meeting specific regulatory requirements – such as establishing capabilities for transaction reporting under MiFID II – and those that are investing in transformative capabilities. “A lot of firms feel that they are constantly playing catch-up with the latest regulations,” Lucas reports. “What really differentiates the more mature players is a focus instead on core capabilities – golden sources of data, predictive analytics, and exploratory dashboards.

“These provide the foundation for meeting current and future regulatory obligations, but also establish the mechanism to radically strengthen the role of oversight functions within the business.” The survey shows that firms which embrace a cross-functional approach to RegTech – across Lines of Defence and incorporating close co-operation with Technology – felt themselves best able to plan, prioritise and implement their RegTech strategies. In the majority of cases, however, overall ownership of the RegTech agenda still sits within Compliance.

Some significant practical challenges remain, with 92 per cent of respondents highlighting the difficulty of integrating RegTech into legacy architectures, and concerns around data privacy and the need to re-train staff. A number of respondents also noted concerns around the long-term viability of start-ups given the critical and sensitive nature of Compliance work.

“There are thousands of RegTech firms entering the market, and firms told us that they really struggle to sort the wheat from the chaff,” Lucas says. Like other areas of FinTech, this remains a nascent business, and there is a strong case for greater partnership on this across the asset management industry, as we have seen for topics like cyber security and blockchain.”

In the UK, the FCA has begun to take a lead on RegTech, including through its Regulatory Sandbox and TechSprint events, and other global regulators have kicked off similar initiatives. “Effective and efficient oversight is in the interests of firms, regulators, the broader industry and society at large,” reports Lucas. “As consultants, we have a duty to help Managers chart a path for RegTech, and to support industry bodies, regulators and governments to guide the development of this fast-growing area.”