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7 Ways Wealth Management Firms Can Innovate

Innovation never stops. To keep pace with structural market shifts in the wealth management industry, it is essential to continuously introduce new technologies that can radically augment client experiences and support new business models’ viability.

However, to fully harness the potential of digital acceleration, new technologies must critically address consumer needs to make wealth management seamless. After all, relevance is key to staying timely and timeless.

Let’s identify the 7 main innovations that will reshape the wealth management industry in the next few years or so.

Take Your Business Model to the Next Level

1. Artificial Intelligence

Today, wealth management trends and developments are mostly associated with the game-changing technology almost everyone is familiar with—Artificial Intelligence (AI). And no, we’re not talking about androids, but highly intelligent software that plays a role in making wealth managers’ jobs better, faster to accomplish, and more efficient.

Today, customer experience is usually self-directed. There’s also an enormous data explosion among structured and unstructured data. Only big data-driven models, AI, and Machine Learning algorithms can deal with this to deliver the right solutions to relevant customers faster and more consistently. The good thing is that you or your company can easily harness the power of AI to make you more productive.

2. Virtual Collaboration

According to Nasdaq, virtual reality (VR) and augmented reality (AR) innovations help wealth management companies make managed investments intuitive for clients, most especially millennials. As more advisers become better familiarized with their skills and capabilities, the adoption rate of these two developments should increase.

The pandemic has made remote working and virtual entertainment through the cloud more accessible, affordable, and convenient. Businesses and clients meet over video conferencing services. This is a testament to AR’s capacity to help wealth managers provide virtual scenarios that can help their clients vividly picture how they are and what to explore financially.

Using these two technologies to engage clientele and harnessing their game-play to promote effective savings and investment practices is something companies should leverage.

3. Increased Tokenization

The first purely digital non-fungible token (NFT) offered by a major auction house was Mike Winkelmann’s Everydays: The first 5000 Days, which was sold for 69 million dollars. Like this NFT, more are seen to become part of the wealth management mainstream in the next few years.

An asset of a purely digital representation’s ownership rights can now be divided, traded, and stored on the blockchain, a distribution-ledger system. Fractionalizing real objects like properties may be difficult, but representing them as tokens works well.

Today, tokenization is seen to open up markets more and boost liquidity as well as make settlement processes seamless. Some even use reporting frameworks to effectively gauge progress.

4. Advanced Analytics

According to Gartner, AI-powered technologies like machine learning, natural-language processing, and deep learning will facilitate the next big advancement in wealth management analytics. It also noted that it is observing a steady progression in the technology’s deployment.

Fintech analytics systems are poised to be more predictive, offering practical guidance on the steps that companies should take for business development.

Per Grand View Research, the global market for alternative data is forecast to expand at a compound annual growth rate of 54.4 percent, poised to occur sometime between 2022 and 2030.

5. Regulatory Technology

Compliance with regulatory issues is becoming daunting for wealth management firms. And given that the regulatory ratchet turns again with new requirements from the Financial Conduct Authority and other watchdogs, wealth managers will continue to harness technology to ensure compliance.

AI-powered systems and other automated digital infrastructure are seen to take over people’s regular and repetitive compliance routines. Anticipating potential regulatory changes, more companies are seen to proactively approach tasks by using new technologies.

As processes improve, parsing through financial regulation becomes faster and easier with RegTech, allowing wealth managers to get actionable insights into their compliance obligations.

There’s also the option to work with a Managed IT Services Provider (MSP) that can implement these compliance software while offering security and 24/7 IT Support. Although, it’s best to partner with one that is certified under the necessary financial compliance standards such as:

  • Financial Industry Regulatory Authority (FINRA)
  • System and Organization Controls (SOC)
  • The Sarbanes-Oxley Act (SOX)
  • Payment Card Industry Data Security Standard (PCI DSS)
  • Payment Services Directive (PSD2)
  • or the Gramm-Leach-Bliley Act (GLBA)

6. Democratization of Financial Advice

Many people are starting to turn to financial advisors to secure their future. Democratizing financial advice, while still having a long way to go, is becoming the new innovative norm. This means that financial planning and its tools are becoming more affordable, customizable, and accessible for everyone, not just for wealthy people.

7. Stronger Cybersecurity

Wealth managers, as we know, hold millions of people’s personal and financial data, making them more susceptible to hackers. One big security breach may result in fines worth millions or even billions of dollars. Moreover, a company’s brand reputation will also get tainted with public distrust.

As the digital world poses more risks and threats from hackers, the finance industry proactively ramps up its regulatory requirements. It demands beefed-up innovative cybersecurity practices and is expected to require more businesses to comply with more complex regulations for data security.

Future-Proofing the Industry

These are just some of the innovations seen to dominate the wealth management industry going forward. Companies can capitalize on this to fare with the digital trends and ensure data security.

As a result, you can expect an efficient system and cost-effective processes, consistent service, dynamic advice, and responsible investing practices—which all result in customer satisfaction. Schedule a call with Nerds Support to see how we can help your Wealth Management firm use technology to gain a competitive edge!

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How Financial Firms Can Maintain Regulatory Compliance in 2022

Technology and data compliance go beyond not storing data publicly. It’s about maintaining a balance between the accumulation of data along with its proper documentation. Financial and wealth management firms in 2022 need to maintain a virtualized environment, encrypted data, and updated software on an ongoing basis. Keeping regulatory compliance with these practices will be essential to maintaining the firm’s reputation.

Many companies have managed to do so by relying on a third party or Managed IT Services Provider (MSP). While such an approach may be costly, in the long run it allows for a more flexible IT budget, all the while still allowing complete control over data and records. That’s what has led many firms to look for solutions that will enable them to properly keep track of their data and protect it from loss or theft.

The Pandemic and Proactive Compliance

With the rise of AI, many firms in the Financial services industry are looking forward to welcoming a more streamlined approach to compliance.

Further, targeted attacks have caused firms to be more aware of their security practices. As a result, some businesses would like to see an environment where they can use artificial intelligence to identify threats and recommend solutions without alerting the attackers.

Despite the rise of cybersecurity attacks during the pandemic, we’ve got a long way to go before financial & wealth management agencies can utilize AI in such regard. Instead, they cope by employing a proactive approach to compliance. As opposed to reactive compliance, opportunistic compliance can give firms more security than they would have otherwise.

How Firms Can Maintain Data Compliance

To begin with, financial firms need to be better at collaborating with data integrity providers.

To implement a proactive approach to compliance, wealth management firms have to partner with a trusted IT provider to develop systems in place that can offer them insights and data about the potential risk to their clients. The more details that are known about a client’s risk profile, the greater chance of knowing if additional regulations are needed.

Take GDPR compliance, for example, which is a regulation that firms need to be aware of. Firms that have been lax about their GDPR compliance may end up with a fine of millions in potential revenue.

Additionally, financial firms need to ensure their technology providers can deliver them the information they need to comply with regulations.

MSP’s should also be better at documenting their policies and processes. It makes it far easier to ensure that the firm is compliant in the present and compliant in the future. Although implementing a proactive approach to compliance can be costly, it yields better results in the long run than reactive approaches do.

Furthermore, it’s not just important that IT solution providers SAY what technology they have in place and what they do, but also have the proof of these processes in place. Distinguished MSP’s like Nerds Support are audited regularly to be considered certified under various regulatory compliance standards, such as SOC Types 1 & 2. Doing so not only builds trust between a financial firm and its MSP on a personal side, but ensures data peace of mind on the business side.

In 2022, regulators will look at financial firms and expect them to be ahead of the curve for data security and integrity. As a result, financial firms will have to rely on AI, partnering with an MSP, or other methods to maintain compliance. But many are still struggling with maintaining compliance without expensive technology.

Preventing Lost Data

Data loss can be a significant hindrance when it comes to building wealth. In some cases, data loss can result from a cyber-attack. In other cases, and more often than people think, it could also be caused by human error.

The leading cause of data loss is that firms lack the proper technology safeguards and training processes in place. So the first step in implementing such a process that will help prevent data loss is to upgrade any outdated systems, or partner with an MSP that can do it for you.

Cyber Liability Insurance

Cyber liability insurance has become an essential piece of the financial and wealth management industry’s ongoing security. Financial firms need to be aware that cyber liability insurance will provide them with peace of mind should a high-level disaster ever strike, like hurricane-caused outage or a successful social engineering scam.

However, the continued growth of the financial and wealth management industry makes it imperative for firms to stay informed about the ever-changing landscape of cyber liability insurance.

In addition, financial and wealth management firms need to know that cyber liability insurance is more than just a one-time payment. Though it may seem expensive, it will prove to be priceless when it comes to helping firms mitigate a cyber-attack or natural disaster.

Employees are part of these firms, and they have essential roles to play in their organizations. This means that they need to set up an environment to protect their sensitive data from cyberattacks while still allowing them the freedom to do their jobs, whether remotely or in the office.

The Key Takeaway

In 2022, financial and wealth management firms will need to be more proactive in taking care of their data. They need to take measures to prevent data loss, and they can do so by implementing AI technologies that can protect their firms.

Firms also need to understand that cyber liability insurance will help them with more than just funding their lawsuit; it will also help them maintain their credibility as a professional business organization.

If you found what we spoke about in this article as valuable, and are looking to advance your business’ technology strategy, or want to learn more about what our IT for Financial firms solution can do to help maintain data compliance, give Nerds Support a call or contact us for a Free Consultation!

Business man clicking a symbol of cloud computing

How Do You Make Regulatory Reporting Easier for Financial Institutions?

How Do You Make Regulatory Reporting Easier for Financial Institutions?

Financial institutions around the world are subjected to strict scrutiny to combat money laundering, tax evasion, fraud, terrorist financing, and other illegal activities. Complying with the standards set by regulatory bodies comes with its own costs, a burden that financial firms have to shoulder. It’s estimated that banks, insurance companies, brokerages, remittance firms, and other types of businesses that make up the financial sector spend more than USD 180 billion on compliance costs alone.

Despite this large spending, many establishments still fall short of meeting the guidelines set by regulatory bodies. This also comes with hefty fines. In just 10 years, financial institutions with local and international operations have accumulated a total of USD 36 billion in sanctions and fines due to non-compliance. In addition to this, brands also incur reputational damage due to getting involved in financial crimes and scandals.

This begs the question: what steps can your financial firm take to reduce the burden of regulatory reporting? At the same time, how can your company effectively protect itself from being used by criminals for illegal financial activities? Here are a few practical suggestions that can help your financial institution stay on top of the rules set by regulatory bodies:

Identify the Company’s Top Priorities for Regulatory Reporting

The first step in improving your company’s regulatory reporting process is to set goals and see how the current system you are using measures against these touchstones. Doing so will help you identify strengths and weaknesses in the process as well as choke points that should be resolved. If you’re planning on upgrading your regulatory reporting software or partnering with a managed IT services provider, this step can also help you create a detailed list of requirements that your new solution should be able to offer.

Examples of common improvements that can raise your establishment’s regulatory reporting capabilities include:

• a centralized data management system that can be readily accessed and used as a source for internal and external reporting;
• an automated end-to-end reporting system that takes care of everything from gathering data to submitting reports; and
• functionalities that allow easy visualization, prioritization, and organization of enterprise-level data, such as a depository for data quality rules.

Does your current regulatory reporting software have these tools and functions? If not, then it might be time to consider a more comprehensive and customizable solution, one that can effectively reduce the amount of work that your compliance team needs to shoulder.

Invest in Future-Proof Compliance Solutions

Financial crimes continue to evolve in an effort to foil the anti-crime measures implemented by law enforcement agencies, regulatory bodies, and financial establishments. To keep up with these changes and to remain effective in their mission, regulatory bodies are continually refining and updating the compliance rules that financial firms have to follow. This causes the cost of compliance to balloon year after year.

More than half of an average company’s compliance expenses goes to labor costs. This is because many firms find it necessary to hire specialized staff members or an IT consulting firm to ensure their company’s compliance every time regulatory bodies roll out new rules. The other half of the compliance budget is directed to technologies that can make the process more efficient.

However, many financial firms are reluctant to spend on new software for regulatory reporting, as this activity does not earn revenue for the company. At the same time, because compliance rules change every now and then, some companies are also not too keen on acquiring an expensive software that will go obsolete or need paid updates in the next few years or so.

What they may not know is that there are comprehensive reporting solutions out in the market today that automatically integrate the updated rules implemented by regulatory bodies. A solution like this can help ensure the integrity and timeliness of the reports generated by a financial establishment. It can also eliminate the need to hire specialized personnel every time regulatory bodies roll out new requirements. Moreover, because the new solution is updated automatically, companies can save on cybersecurity and what they would otherwise spend on new software or expensive updates.

In addition to savings, enterprise-wide regulatory reporting solutions offer a wide range of functionalities and customization options. This means that users can modify these solutions to suit the particular needs of their operation.

The Importance of Regulatory Reporting

Investing in regulatory reporting technologies has benefits that go beyond ensuring your company’s compliance. It’s also a solid step in protecting your company from the negative impacts of financial crime, like substantial fines and damages to one’s brand and integrity. In addition, providing your compliance team with the right tools and services will reduce the number of menial tasks that they need to accomplish. This, in turn, gives them more time and resources to ensure the quality of the reports that are submitted to regulatory bodies.

 

Financial advisor working remotely from home on his computer.

4 Things Financial Firms can do to Succeed Remotely

Financial firms are in the best position to succeed in a remote environment. Engaging with clients is easier than meeting in person and much of the work can be done regardless of location.

Americans are slowly adjusting to working from home. As states begin to ease the quarantine restrictions some companies are declaring permanent remote work environments. Companies like Facebook and Twitter are offering their employees the opportunity to work from home indefinitely.

Many firms have already moved to a fully remote operation and many more will do so in the future. However, moving to remote work can be difficult if handled incorrectly. Creating a successful remote operation is a new challenge CPA’s and financial firms will have to overcome.

When the lock-down started business owners looked to getting operations up as quickly as possible. Those who hadn’t migrated to a cloud based system did so. Others only migrated partly. While others still, struggled to adapt to a fully remote workplace. Video conferencing tools like Zoom and Microsoft teams grew in use and popularity.

Daily downloads of the videoconferencing app Zoom increased by 300 million participants since March. Businesses and employees spent time researching the different videoconferencing application and IT services companies that best fit their standards. But that’s only the beginning.

If you as a financial firm want to succeed in a remote environment you have to navigate cooperation, time management, data security and keeping your business functioning even while everyone may be so distant.

Here are a few ways to achieve success for your firm while working apart.

1) Take Advantage of Your Remote Environment

Maybe you’ve already noticed, but it’s difficult to distract each other with office gossip when there isn’t an office to gossip about. 85 percent of employees are either not engaged or disengaged at work. As a result, there is a 7 trillion dollar loss in productivity. Many offices have an open office layout which create a 32 percent drop in productivity.

However, this is harder to replicate when you’re forced to work remotely. Instead, the productive thing to do is to set virtual office hours or schedule meetings for a specific hour the day. Employees and staff can reserve a meeting however you choose. This might appear obvious to some but even in a remote environment it’s easy to get side tracked. You get one call from one colleague and then anther call 20 minutes later from an employee.  By the time you finish, you might not remember what you were doing in the first place.

Designate a period of time in your weekly and daily schedule for all meetings. The routine will also keep you focused and organized. Keeping a routine can lead to positive mental health. A routine can help manage stress levels and less overall anxiety, according to one study by Northwestern Medicine. College professors and councilors are very familiar with this system. It would be like having virtual office hours where team members can choose a slot and book a meeting.

2) Adapt to Technology

If you stop and think, if something like the Lockdown of 2020 had happened ten years earlier, remote work would not be possible. The emergence of cloud technology and communication apps like Microsoft Teams, Skype, Facetime, and Zoom together is what allows for a successful remote work environment.

Moving forward, many experts expect these changes to persist, bringing in a new era of remote activity. For financial firms, advising, asset valuation, and consulting will be done remotely. Firms should be looking to build on this change and integrate a remote reality to their existing operation.

What can your firm do to remain competitive, updated, and secure. Invest in a cloud service provider. IT services are going to be pivotal in the coming decades. Managed service providers will be in a position to make or break your firm. Look up the different cloud models and their features. Are they FINRA or SOX compliant? Where are their servers located? Are they stored somewhere outside the U.S.?

Nerds Support specializes in working with financial firms. However, there are many options available when hiring a managed IT service provider. Some are better than others, depending on the industry. You have to factor in security, location, knowledge of your industry, and even availability.

The Workplace platform provides a comprehensive solution that combines cyber security, compliance, & remote work needs.

The Workplace platform provides a comprehensive solution that combines cyber security, compliance, & remote work needs.

Is there someone you can talk to when something goes wrong? Do you have a point of contact? Sometimes a support team consists of strangers and other times it’s the CEO.

4) Build a Better Team Remotely

Human beings are social animals.  Although remote work is beneficial to productivity, it might be harmful to be socially isolated from your team. But there is a solution.

Team building is an important tool for social bonding and improving motivation. Setting aside an hour at the end of the week to celebrate that week’s accomplishments is a good example of team-building. There are a ton of other games and exercises you can try over video chat. Many have done virtual hangouts. Virtual happy hours are also popular. Even virtual competitions with certain free online games have brought offices together.   

5) Make Sure to Reconnect with Reality

The biggest issue in a remote work environment is that everything does seem to blend together. When you can’t distinguish your bedroom from your workplace it’s easy to get lost in a work-all-the-time mentality. Having an office has the psychological benefit of creating a barrier between your personal and work life.

A Stanford study showed that after 50 hours a week productivity sharply drops. Even worse, after 55 hours productivity gets so low that working becomes counterproductive.

I bring up the Stanford study because the comforts of working from home can often trick you into working more. Working an extra hour won’t kill you but the added stress of feeling like you’re at work at all hours is a serious problem. Establish clear boundaries for yourself and your team. When it’s time to log off, you log off. Communicate with your team your unavailability after a set time. Go for a walk, listen to music, but most importantly stay away from your computer.

 

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How the Cloud Keeps Data Safe for Financial Firms

A 2019 Global Wealth Study by Boston Consulting group reported financial services firms are hit by cyberattacks 300 times more than other companies. Financial institutions have a lot of sensitive data cybercriminals can monetize if accessed. That is why the financial services industry is so heavily regulated.

The US has experienced huge breaches of consumer data the last few years, especially last year during the emergence of evolving remote work solutions. The most famous example in recent memory is the Financial Technology, or FinTech, company Equifax. They experienced a data breach in 2017. The breach compromised the personal financial information and social security numbers of more than 146 million people.

FinTech gives consumers access to mobile banking, personal financial data and other services. However, since FinTech is so recent, it doesn’t have a regulatory framework yet. In the US, for example, in the mobile payment industry there are eight federal agencies with minor oversight over finance. Moreover, all 50 states have their own rules. It’s a very different story for Financial organizations and as we’ve seen above, for good reason.

As we’ve seen, lacking a regulatory framework impacts more than just a financial firm. It puts consumers at risk. In the financial industry, achieving regulatory compliance should be the focus for financial institutions big and small.

Cloud Security and Compliance

For a financial firm, credibility is everything. No organization wants to be fined, shamed or, worst of all, left behind by clients. Therefore, firms need to understand the challenges ahead to achieve compliance. Compliance is one of the biggest reasons financial firms are skeptical about engaging in a cloud strategy. However, once you understand how compliance is achieved in the cloud, the transition won’t seem so daunting.

Cyber Threats

As mentioned above, cyber security threats are sophisticated and aimed at getting your firm’s information. Hackers use a variety of methods to compromise your infrastructure for financial gain.  You can’t discuss cloud compliance without mentioning cloud security. As the workforce becomes increasingly mobile it gets easier to attack organizations operating on insecure networks. As a result ransomware is the most common attacks and is now a $2 billion- per-year industry.

One important thing to keep in mind

One of the main concerns that come up when considering financial cloud compliance is that customers don’t manage their own IT infrastructure.

That’s why it’s important to stress the fact that cloud compliance is a two way street. Managed IT service providers have a contractual obligation to their clients but clients must rely on best practices and regulations to look out for their interests as well.  In other words, a specific provider, be SaaS or HaaS will offer certain compliance and security features, but it’s up to the client to responsibly implement those features. With that said, we move on to the features themselves.

FinTech Compliance Cloud Computing Statistics

What’s Covered by a Financial Cloud provider?

It depends. Since the every cloud provider differs in their services and the way they present information, CPA’s and financial companies should review each cloud option carefully. That means choosing the appropriate cloud provider. Like shoes, cloud providers are not a one-size-fits-all.

Things to look out for when choosing a cloud provider:

1) What data will be stored in the cloud and what will remain in house. Why?

2) Where the data will be stored. Some providers don’t give you this information.

3) Service Level Agreement (SLA). Due to the compliance and regulations standards in the financial services industry, your firm might have to carefully review the types of services the provider offers and which align with your needs.

4) Encrypting Data. Keeping with compliance standards means encrypting sensitive data to protect it.

5) Systems & access controls. Data security is a big compliance mandate. You should know who at your firm has access to what data and what your cloud provider has access to as well.

Regulations and Guidelines

The important thing is that a firm become aware of the regulatory policies and procedures it’s expected to comply with. The Financial Cloud provider should have documentary records of how they plan to meet compliance in the cloud.

The GLBA ( Gramm- Leach- Bliley Act) and the SOX (Sarbanes- Oxley) Act are two main pieces of legislation that deal with the storage and maintenance of information within a financial institution. Therefore, to help with compliance a cloud provider should share information and supply your firm with access to necessary documentation.

You can learn more in Nerds Support’s white paper on compliance which details the importance of maintaining data compliance.

Conclusion

Whether your firm chooses a private cloud or public cloud, compliance guidelines must be met to ensure optimal security. Cloud service providers and financial organizations should continue to improve their processes. Otherwise, your organization will be penalized or even breached. The data migrated from a firm to the cloud is valuable and entrusted to you by your clients. And when you mishandle that data, you run the risk of losing everything.

If you’d like to read more about how your financial or wealth management company can use the cloud to innovate, check out our page on IT Support for Financial Firms.

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