As Ray mentioned in his recent blog post about the past year in financial services, there have been numerous exciting changes in terms of the products and services that are available to the financial consumer. When we look ahead to 2016, we see some immediate and long-term challenges that will face all of us. Let’s take a look at some of the more significant ones and what you can do to prepare.
For years we have heard of the SEC Money Market Fund Reform, and in October 2016 it will finally come home to roost. There are many, many components to the reform, but the largest impacts to the brokerage community will be the floating NAV and the fees and gates amendments. Both of these will result in fairly significant impacts to brokerage systems, investment product offerings available to the retail and institutional investor, and brokerage operations. If you haven’t started already, you need to review your Account Opening or Onboarding solutions, Money Market platform(s), and Asset Movement solutions to determine any effects and plan changes accordingly. The compliance date for both of these amendments is October 14, 2016. By that time the brokerage firms, and their systems, need to be ready.
Another topic that has been relevant in the recent past and will continue to be relevant in the immediate and foreseeable future is Cybersecurity. Everything is digital these days, and technology is advancing at break-neck speeds. While this offers a lot of wonderful opportunities, it also opens up the digital back door to those who are seeking to disrupt the markets. Keeping every aspect of your IT infrastructure safe and intact will consume countless resources, assuming you want to stay on par with or ahead of the curve.
Shortened Settlement Cycles and Protecting Senior Investors are two hot topics that may not directly affect us in 2016 with new regulations, but will certainly consume time and energy as we plan for and analyze the changes they will bring over time.
Shortened Settlement Cycles–or T+2 as it is sometimes referred to–will certainly have dramatic implications to all aspects of the settlement process. A shortened settlement cycle within the right types of securities can be a wonderful tool for reducing systemic risk. But there are various challenges that could lead to operational risks that ultimately would impact brokerage firms and their clients. You will need to stay on top of the industry focus groups and also look internally to determine where your own operational risk may be. Tightened controls and increased automation of certain processes and procedures will be required to prepare for this shortened settlement cycle initiative.
Protecting senior investors isn’t something that will result in direct rules and regulations, at least not that we can tell at this time. But it is something that all financial services firms need to be focused on. Protecting the rights and investments and security of senior investors–those over the age of 65–is something that could result in numerous changes within your firm. Your advisors, representatives, and consultants need to be well-versed in how to handle an aging investor population and also how to handle situations where clients may require additional care and advice when making important decisions. And, as a firm, you may need to consider changes to policies and procedures to make sure you keep your best interests protected as well as those of your clients.
What Should You Be Doing in 2016?
So, what can you do in 2016? First and foremost, stay on top of all of the industry focus groups, committees, and publications to understand as much of the changing landscape as you can. Get involved and make sure you understand the ins and outs of the changes and how they will impact your firm. From there, you will need to analyze your internal risks – financial, operational, client and rep retention – and build action plans. Various solutions will surface and you need to be ready and willing to act. Make changes where needed, increase automation whenever practical, mitigate risks to your business and for your clients.
2016 will prove to be just as challenging as the past few years. Regulatory changes are not slowing down and rules are just as complex as ever. You must protect your firm and your clients from all of it, while also increasing revenue and growing your client base. Accomplishing this will require focus, attention, planning and a willingness to change.
If you’re interested in learning how IFS can help your firm in 2016, click here.