Transaction Reporting for Wealth Managers: Data, Resourcing and Tech Present the Path to Success

Sonia Nath, Edward Gripton, Bernardo Castel-Branco

A wise philosopher once said that the only constant thing in life is change; seasons change, schedules change, and our circumstances change. However, at Alpha, we believe we’ve identified a second constant in life; the regulatory challenge of transaction reporting and the need to get it right once and for all to prevent painful and drawn-out back-reporting programmes.

MiFID II Transaction Reporting remains a top priority for the FCA as a key tool to monitor market abuse. Market Watch 65 reaffirmed the requirement for firms to verify the completeness and accuracy of transaction reports. However, data from Kaizen Reporting suggests that a staggering 75% of transaction reports submitted by Wealth Managers continue to have one or more errors in them. In addition, the average Wealth Manager has over 50 distinct error types to deal with (Kaizen Reporting, 2020).

In our experience, the key drivers of inaccurate reporting are:

  • Inaccurate and incomplete data
  • Technology platforms with poorly implemented regulatory reporting modules
  • Inadequate knowledge and capacity across the Business

Due to these drivers, we often see a common set of errors, which would significantly improve the quality of reporting if addressed. These errors are issues with:

  • Client personal data and identification codes
  • Transmission of order indicators
  • Short selling indicators
  • On and off-venue transactions and instrument-related data (ISIN)

While each Wealth Manager’s business will bring slightly different challenges, at least 75% of errors typically relate to issues with the above (Kaizen Reporting, 2020). Alpha’s experience has shown that the key to successful transaction reporting lies in getting the data, technology and operating model right.

Data – An enterprise effort

Missing or incorrectly gathered client data often leads to incorrect reports. Remediating these gaps needs to be a front-to-back-office effort. While back-office teams will likely be the ones to identify gaps or 2nd priority identifiers, they will then need to engage the front office to gather this data from clients. Robust data governance across the Business is critical for the success of regulatory reporting.

Technology – Understand your Order Management System (OMS) & its limitations

OMS vendors are often not fully abreast of MiFIR requirements, meaning ‘out of the box’ solutions often generate reports that do not meet requirements. However, the onus is on the Wealth Manager to report transactions accurately and therefore, OMS reporting modules should be assessed thoroughly to ensure compliance. We too often see the Regulatory Reporting team creating manual workarounds to address issues with reporting tools. This is incredibly complex and adds huge amounts of effort and risk to transaction reporting programmes and adds more room for error if they do not get it correct. It is possible to ask the reporting solution provider to fix the issues, but this can often be a slow and challenging process (if it’s even possible!). Furthermore, the implementation and change management of such solutions is typically flawed from the start, with a lack of internal and external expertise to clearly define reporting scenarios, business requirements and testing. 

Operating Model – The right resourcing model

It’s pivotal that the regulatory reporting team has the appropriate capacity, knowledge of regulatory requirements, and are supported by IT and data functions. The Regulatory Reporting team needs to work with IT and other functions to address problems at their source and have appropriate governance to test and sign off fixes rather than trying to resolve issues with high-risk manual workarounds that can do more harm than good.

Get in touch

Our experience with transaction reporting programmes has provided us with the knowledge of how to report accurately, the know-how to quickly identify reporting errors and remedy them, and the requirements to implement an operating model set up for success.

Don’t let inaccurate or incomplete reporting become a constant in life. Please get in touch with us to discuss the Regulatory Reporting challenges that your organisation faces.

About the Authors

Sonia Nath

Sonia Nath is a Manager at Alpha FMC with extensive regulatory consulting experience. She has direct experience working at a number of leading, global wealth managers to deliver large-scale remediation projects to improve the accuracy and completeness of their transaction reports

Edward Gripton
Senior Manager

Edward Gripton is a Senior Manager at Alpha FMC with over 8 years of experience working in Regulatory Compliance and Risk. He specialises in regulatory reporting and has a range of experience across MiFID II, EMIR reporting and SFTR.

Bernardo Castel-Branco
Associate Director

Bernardo is an Associate Director at Alpha FMC with over 14 years of regulatory consulting experience for the Asset and Wealth Management Industry. He leads Alpha’s Regulatory Reporting proposition and has supported some of the largest regulatory reporting implementation and remediation projects for the buy-side.