Compliance now top concern for wealth management sector

Compliance now top concern for wealth management sector

Compliance now top concern for wealth management sector

Do you feel you’re spending too much of your time on compliance issues and not enough with clients? Another new global survey indicates that things will likely get worse.

Although global wealth has rebounded to nearly pre-2008 levels, the wealth management industry is facing significant margin pressure due to costly regulatory requirements, uneven growth across geographic markets, loss of certain types of fees and subdued client activity.

According to a new report from PwC, compliance has replaced reputation as the top risk-management concern among global wealth management executives as firms struggle to keep pace with the scale, speed and costs of current and planned regulatory change.

The survey noted an unprecedented level of frustration among senior executives who are finding themselves increasingly challenged to keep up with not only the business as usual pressures, but increased compliance and scrutiny.

The cost of compliance will continue to rise, with respondents forecasting that risk and regulatory compliance expenses will account for 7% of annual revenue in two years, up from 5% today. The survey also found that heads of risk and compliance would be some of the most sought-after skills in the immediate future.

"Wealth managers need to be innovative and proactive if they are to rebuild public perception and gain higher levels of client confidence and trust," says Raj Kothari, PwC's National Asset Management Leader and Greater Toronto Area managing partner.

"Wealth managers must demonstrate how they are doing the right thing, including putting the needs and interests of their clients ahead of simply maximizing profits. This will require a behavioural change among producers, distributors and the advisory community."

The PwC survey confirms the results of a separate study by human resources firm Robert Half earlier in the week which found that regulatory and compliance issues were the biggest concerns among wealth management executives.

In that study, 37% of Canadian wealth executives said they expect costs related to financial regulations to keep rising, 32% of Canadian executives expect to hire interim staff for compliance issues and 26% expect to make full-time hires.

How much time do you spend in client-facing activity vs. compliance activity? Sound off in the comments.