With its potential to restore consumer trust and support the delivery of advice-at-scale, RegTech has much to offer the financial planning profession. Deborah Young talks about how RegTech is shaping up and where it could take compliance in the years to come.

Deborah Young is used to being at the frontline of change in the financial services industry. With a remarkable track record as an innovator and enabler, she brings a unique set of skills and insights to her founding role as CEO at the RegTech Association (RTA) – a not-for-profit organisation set up to establish a centre for global RegTech excellence right here in Australia. 

Founded in 2017, the RegTech Association (RTA) is a non-profit organisation focusing on what is needed to support the growth of the regulatory technology (RegTech) sector and to accelerate RegTech adoption across all regulated industry verticals. Its vision is to be a global centre of excellence by facilitating the building of higher performing, ethical and compliant businesses through RegTech innovation and investment.

The RTA has expanded its activities, membership and influence at an extraordinary pace under Deborah’s leadership. Growing from just 10 firms to more than 140 members in just three years, the RTA has quickly become a leading advocate for RegTech globally, as well as a valued voice at the highest level in Australia and now starting globally.

 Even though she’s used to working closely with board members and executive leaders in a wide range of industries, Deborah says addressing a Senate Select Committee on Fintech and RegTech in Canberra recently was an awe-inspiring experience.

 “It was such a great opportunity to see how far we’ve come in the last three years and get direction from policy makers on where to head next,” she says.  

“The very fact that we were invited to make a submission to Government is a testament to the value and impact of the work the RTA and our members have been doing. But the questions we were asked by the committee highlight important areas and potential partnerships to explore in order to get even greater engagement and better outcomes.” 

Containing compliance costs

 The RTA was originally founded to address problems between small software vendors and the larger banks.

 “We were seeing RegTech start-ups stumbling due to onerous procurement processes,” says Deborah. “As we’ve grown our membership of technology providers and corporates, we’ve turned our minds to other areas of financial services, including financial planning, superannuation and insurance.”

The time is certainly ripe for the RTA to be raising the profile of RegTech solutions among financial planners. According to the 2019 FPA member survey conducted by CoreData, the growing cost of regulation is the number one challenge facing financial planners today. 

“Historically, 5 per cent of advice files would be sampled for compliance review, which can now be increased to 100 per cent, cost-effectively, with RegTech,” says Samantha Clarke, CEO and Founder of Advice RegTech, a product provider and RTA member. 

“To meet new expectations of due diligence and monitoring advice for compliance and best interest, many planners and licensees are moving towards pre-vetting their advice using RegTech solutions before it’s delivered to clients.”

 Paul Carey, Chief Operating Officer of TIQK, another RTA member, agrees with Samantha that advice businesses that don’t take up technology are missing a big chance to contain their compliance costs. 

“With the close and continuous monitoring ASIC is now looking for, it’s just not possible to deliver on this with people as your only resource,” he says. “Whether you’re a licensee with five or 200 planners, you simply can’t afford to have a team of people reviewing every piece of advice.” 

Support for good judgement

“The problem we’re all trying to solve in developing RegTech solutions for planners is how do we get good information into the hands of practitioners, so the quality of advice can improve before it’s handed to the customer,” Paul adds.

“Compliance is really complex and it requires professional judgement to determine if advice is compliant and meets the client’s best interests. Technology can augment scaleable compliance models, taking on repetitive tasks to improve turnaround time and reduce costs. But it’s no replacement for humans. Planners will ultimately want their advice to be judged by other people, not by technology. RegTech solutions are allowing the experts to apply their judgement where it’s needed.” 

The sweet spot for financial planning

 In offering a more comprehensive and cost-effective way to manage compliance and lift the quality of advice, RegTech also creates an opportunity for planners to reassure consumers in the wake of the Royal Commission inquiry.

“The potential for RegTech to restore trust and bring financial resilience was one of four key themes included in the recent RTA submission to the select committee,” says Deborah.

 It’s a view that Samantha supports: “RegTech is part of the solution to help restore confidence among Australians in the financial services sector. The financial planning community is raising the level of professionalism and restoring trust through that process.

“The majority of planners serve clients to a high standard and RegTech supports this. By assisting with the efficiency and effectiveness of compliance reviews across more advice files, including SOAs, AFSLs and planners can reassure both clients and the regulator that they’re serious about compliance and quality standards for every client.”

Samantha also agrees with the financial resilience part of this theme.

“Research shows us time and again that many Australians have unmet advice needs,” she says. “RegTech has an important role to play in freeing up more of a planner’s time to focus on their clients’ needs.

“Any solution that can help financial planning businesses get back to business is key for the profession and also for Australians who are seeking quality advice to support their financial wellbeing.”

Mitigation instead of remediation

 As well as the four key themes in the submission, the RTA drew attention to some of the challenges holding the RegTech industry back.

“After the Royal Commission, a strong focus on remediation in financial services is important,” says Deborah. “But it is a key challenge for RegTech providers seeking to get traction with corporates or smaller businesses. In part, transformation relies on mitigation and preventing compliance breaches from happening. This is one of the most compelling reasons for the sector to invest in RegTech. 

“Getting more businesses on board with RegTech will send a clear message to the Australian community that a positive transformation of financial services is well underway,” she says.

 “A move into RegTech is a positive step for conduct and culture. There is a cultural change that’s required throughout the sector and our RTA community is committed to moving that dial.”

A broad and complex category

This change in culture doesn’t just come from meeting new compliance standards set by regulators. According to Deborah, there are a whole range of RegTech solutions that can support cultural transformation and greater accountability throughout a business.

“RegTech is a very diverse area and includes any software that helps with the compliance or regulation process,” she says. “We have members offering marketing and product compliance. If a business runs marketing campaigns promoting products and services that provide advice, there are compliance solutions out there to monitor compliance for campaign content. 

“Then there are PDF to digital technologies that can help planners capture and audit content from thousands of PDF documents,” says Deborah.

“Products like these are well suited to vetting content and information, but there are also some very smart tools available for monitoring and measuring culture and conduct risk. Voice data analytics providers can record conversations to pick up on the nuances of customer interactions and get greater transparency in an aggregated form on the quality of those interactions.

 “Add to these a whole host of technologies for knowing your customer, anti-money laundering and cyber security, and you get an idea of just how many solutions financial planners could be taking up to supplement software being developed by providers like TIQK and Advice RegTech, to support the advice process.” 

Benefits for all stakeholders

With so many solutions to choose from, planners might feel that introducing new technology is just too big a project to tackle. But business transformation at any level doesn’t happen overnight, and the same is true for embedding the benefits of new technology.

By taking even small, simple steps into RegTech, financial planning businesses can add momentum and get meaningful results from changing their culture and working practises. 

“We know that RegTech solutions can bring trust at scale,” says Deborah. “It’s all about bringing transparency, getting better control and putting information in the hands of people who need it, when they need it.

“The benefits of this transparency flow all the way through an organisation – from client-facing employees to compliance teams and line managers, the executive team and up to boards and shareholders, too. Technology has this real potential to bring rigour and trust back to the whole corporate governance process.

“Ultimately, consumers stand to benefit, too, with the whole organisation working on the basis of robust data and decision-making.”

 Deborah adds: “And by moving away from all the grunt work traditionally required by compliance, businesses can become more client-centric, both in terms of available resources and awareness of culture and behaviour, and how these impact on the client.” 

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How the regulators are using RegTech 

APRA has engaged Vizor, an Irish RegTech company, to supply its new data collection system.

ASIC runs a quarterly RegTech liaison forum, open for anybody in RegTech to attend. The RegTech Association (RTA) has a platform at those forums. Product providers and financial services businesses can attend to hear about current RegTech priorities for ASIC.

ASIC has also designed a series of symposiums focusing on different aspects of RegTech across the financial services sector, including one on financial planning. Events like these demonstrate that ASIC is keen to engage with RegTech and the regulator’s door is open to RegTech solutions.

AUSTRAC delivers a very comprehensive program, including regular one-on-one sessions with RegTech software vendors, to share demonstrations of a wide range of software covering financial crime.

The RegTech Association (RTA) has also helped AUSTRAC design a series of tech sprints – a set period of time during which specific work has to be completed and made ready

for review.

Industry experts, RegTech providers and reporting entities from all segments of the financial services industry, come together in a workshop format to assist RegTech providers better understand what the sector is looking for.

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What RegTech can offer

 How can RegTech help me in my business?

The escalating costs of compliance are a major concern for financial planners. In the FPA’s 2019 members’ survey conducted by CoreData, it was found to be the number one challenge they are facing.

RegTech solutions for planners are designed to support businesses with their many compliance requirements. They can be used to automate some compliance processes and tasks to support faster and the more cost-effective delivery of advice.

By using RegTech solutions as part of a robust and fit-for-purpose compliance framework, financial planning businesses can also demonstrate their commitment to offering a transparent service that meets both quality and compliance standards. This can be an important point of difference for planning businesses, as well as having the potential to build greater trust in the profession as a whole.

What are the RegTech challenges?

Financial planners are under pressure from many changes in their professional landscape. Their time is scarce and exploring, selecting and implementing RegTech solutions is likely to be one of many priorities for business transformation. 

The good news is that there are a growing number of RegTech providers well aware of these challenges financial planners are facing. As a relatively young industry, these providers are keen to engage with all types of financial planning businesses to work on fast and effective integration of their solutions.

How can I find out more about RegTech?

Contacting the RegTech Association (RTA) is one way to find out more about RegTech solutions available and how they can meet compliance needs. The FPA has also created a knowledge hub about fintech for planners on its website. RegTech products are among the solutions provided by fintech partners currently working with the FPA.

The FPA and RTA are in discussion about how both associations can work together to support financial planners in improving compliance capacity and efficiency through technology.