Every investment manager agrees that the pace of regulatory change has increased. Following a bumper year for regulation in 2023, the outlook for 2024 and 2025 looks similarly challenging. Identifying relevant regulatory requirements, deciding what needs to change and then embedding these changes across the organization has become a key skill for investment managers. Here we explain why regulatory change matters, its link to strategy and sales, then share four “no regret moves” that every asset manager can use to keep up.
The regulatory pipeline for Asset Managers globally
It’s not just about regulators; How you manage regulatory change matters to clients
Many people assume that regulatory change doesn’t matter much because it’s an internal Compliance discussion and thus invisible to the client. This is wrong. Asset owners work with many managers and experience different service levels first-hand.
Asset owners receive regulatory and client reporting from asset managers. In addition, leading asset managers provide their clients with pro-active updates on regulatory change, offer seminars with internal experts and discuss resulting new opportunities. While regulatory change management is rarely measured directly, our clients tell us that this element of overall service quality can be a key differentiator in retaining assets and winning new business.
Getting a grip on regulation
Most firms aim to identify upcoming regulations, assess impact on the business, plan and communicate actions, implement actions, then learn and review. While this sounds straightforward, our experience is that many firms fail to get the basics right.
Although firms usually have access to very detailed information about regulation, they struggle to translate this to the relevant business functions and decision makers. As a result, companies build business plans that do not include regulatory work, leading to fire drills, urgent remediation projects and delays to non-regulatory projects, as well as lurking icebergs, where parts of the firm have missed regulatory changes altogether.
Leading practice is to build a cross-functional SWAT (Special Weapons And Tactics) team which brings together mid-senior people to understand regulatory developments to identify strategic and tactical impacts and opportunities. Following issue identification, the team then cascades these views into day-to-day processes such as sales planning and product development. Alpha has worked with several global asset and wealth managers to map relevant regulations to a business unit and country level, agree a responsible executive and then track progress across the whole organization.
Best practice regulatory management cycle
Using regulation to drive strategy and sales
Leaders are not just the companies with perfect regulatory oversight. Rather, they are the companies that integrate regulatory change into their strategic and tactical decision making. Demand changes like ESG are related to regulation, so firms which identified this dynamic could position themselves strategically over five to ten years to be amongst the leaders. On a tactical level, leaders use regulatory developments alongside flow data to ensure that they are talking about the issues facing their clients. This can require a broad view. For example, a solvency discussion with an insurance client will be totally different to a solvency discussion with a Dutch pension fund[1].
[1] See European Insurance and Occupational Pensions Authority for information on Solvency II vs Pensioen Federatie for FTK financial assessment framework
No-regret moves for every Asset Manager
In addition to mapping out new regulatory challenges, incorporating them into your strategy and tracking your business’ progress to address them, asset managers need to address specific technical challenges in four areas:
The benefits of mastering regulatory change
Mastering the complexities of regulatory change offers substantial advantages to asset managers. By navigating these intricacies adeptly, you can nurture trust and build credibility with your clients. Integrating regulatory changes strategically into your decision-making processes empowers you to spot opportunities that others might overlook. Taking a proactive approach to regulatory management acts as a shield, reducing the risk of business disruptions caused by resource shortages and urgent remediation projects, thus preserving operational efficiency.
In essence, mastering regulatory management isn’t just a necessity; it’s a powerful tool that equips you to construct a resilient, client-focused business even amidst regulatory challenges.
Contact us
Alpha FMC has extensive experience working with asset managers to assist them in meeting regulatory challenges and finding opportunities related to regulatory change. We’d be delighted to discuss this topic to accelerate your delivery. For more information on how Alpha FMC can help your organization, please contact us here.
About the Authors
Andrew Salmon
Associate Director
Andrew is an Associate Director at Alpha - he joined Alpha in 2023 in Zurich and is an active member of Alpha’s Client & Digital practice for Continental Europe.
He has over 20 years of experience, both as a consultant and leader of asset management organizations, most recently as Head of Investment Communications for a global asset manager, responsible for a large team covering a broad range of marketing and sales support activities to support the growth of the firm, with particular focus on strategy, systems and processes to build the business during regulatory change.
His work at Alpha focuses on assisting investment managers to grow their businesses by joining the dots across sales, systems, products, processes, people and data.
He holds a Master’s degree in Engineering Science from St John’s College, Oxford University.
Claire Hepworth
Associate Director
Claire is an Associate Director at Alpha with over 30 years’ asset and wealth management industry experience. Prior to joining Alpha, Claire was an Executive Director at JPMorgan Asset Management where she held a variety of leadership roles covering global transformation projects in client service, sales, and marketing, focusing on Distribution and Client Experience.
Claire worked for several asset and wealth management firms, including SEI Investments where she led the global client service department. Throughout her career, Claire has successfully led numerous projects helping distribution functions operate more efficiently, while mitigating risk and enhancing both client journeys and staff procedures.
Her areas of focus include client lifecycle and client experience strategy and design, sales process optimization, client service good practice, management of obligations, fees, rebates and legal agreements, and client onboarding, transitions, and oversight.
Bernardo Castel-Branco
Director, Head of UK Risk and Compliance
Bernardo is a Director at Alpha with more than 15 years of regulatory consulting experience for the Asset Management Industry. He heads our UK Risk and Compliance practice and has broad experience across European regulatory compliance projects having supported a number of clients in the context of MiFID/MiFIR, EMIR, FCA Handbook and AIFMD/UCITs.
Bernardo has a broad foundation in end-to-end regulatory change programs for the Financial Services sector. He is experienced in delivering projects, managing teams and senior stakeholders across the FCA and EU regimes and expectations.