Compliance expert unpacks hurdles, pitfalls, and potential to squeeze value from new requirements
It’s been months since the Client Focused Reforms (CFRs) took full effect, and the Canadian wealth industry is still getting to grips with the implications.
With a shifting emphasis from KYP to KYC, home offices and advisors are having to rethink the way they approach regulatory compliance. At the same time, they have to consider how to continue delivering value and enhance their relationships with clients.
While it might sound like a tough balancing act, meeting those two objectives can be done in a synergistic way using the right technologies and processes.
In an upcoming webinar, Wealth Professional will speak with leading industry and compliance subject matter experts to discuss how firms have adapted to client-focused reforms, as well as the top concerns they’re still facing. To see the full list of speakers and sign up for this engaging and educational free-for-advisors event, click here.
Among those experts is Betty Tien, partner, FSI Regulatory Compliance at Deloitte Canada, who shares her thoughts on the industry’s CFR journey so far below.
Wealth Professional: From your standpoint, how challenging has it been for firms and advisors to navigate through the new requirements from the CFRs?
Betty Tien: Without a doubt, it’s been challenging, but that’s to be expected with any change of this magnitude.
Implementing CFR-related changes during COVID was tough as there were a lot of other priorities during this time. Many teams were stretched for time and needed to invest additional resources to make the implementation due dates.
Interpretation of the new requirements was also a challenge. In particular, areas such as how “significant” a product change should be to be counted and monitored. Because there wasn’t a clear-cut definition, there was no requirement that firms could simply adopt. Instead, they had to really navigate and critically think through how to define “significant” in the context of their firm, because there isn’t a one-size-fits-all approach.
WP: What are some technological or process pitfalls that could be putting pressure on advisors now?
BT: Now that implementation is over, and we are past Day 1, the focus is on sustainability and finding this happy place where the requirements are being met in a way that is not an operational burden to both advisors and those in supervisory roles.
We’re seeing some firms using manual processes and controls to meet the requirements. While that doesn’t necessarily mean they’re not compliant, it certainly increases the risk of human error and results in a control environment that is at a higher risk of operational deficiencies.
Certain firms may also view CFR training as a one-time activity done with implementation, stopping once Day 1 had passed, rather than a continuous need to be addressed over time. There’s also the risk of viewing the CFRs as a check-the-box exercise, when the new level of rigor introduced can unlock value for reasons beyond pure compliance – by using the data from analysing one’s product shelf competitiveness to better understand the market, for example.
WP: What are you looking forward to as a key expert at the webinar on KYC regulation on November 1?
BT: I look forward to connecting with my fellow panelists and participants, sharing my observations on CFR now that we’re about 10 months post the last implementation date, and hearing from others on their reflections on the journey, as well as their outlook on what’s to come.
The upcoming webinar by Morningstar in partnership with Wealth Professional, titled “KYC Regulation: Uncovering Actionable Insights to Better Serve Your Clients”, will be held on November 1, 2:30 PM ET. To see the full list of speakers and sign up for this engaging and free educational event, click here.