Financial advice firms are increasingly looking to regulatory technology (regtech) in an effort to offset the rising cost of compliance, according to a new report.
The latest Netwealth AdviceTech Report found that 37% of advice practices were looking to increase their investment in regtech over the next financial year.
Almost four in 10 (39%) of firms believe that dealing with the demands of ASIC and meeting regulatory compliance requirements are expected to be impacted most by technology over the next five years. By comparison, only 30% of firms see managed accounts and 17% see robo-advice being impacted most by technology.
Netwealth joint managing director, Matt Heine, said advisers tended to use regtech capabilities that were built into the systems they already used, rather than standalone solutions.
However, he noted, in some areas such as breach reporting, risk management and audit, a significant proportion of firms were using separate systems.
“Regtech is being used mainly to address Statement of Advice (SOA) issues, for process and workflow oversight and for meeting legislative obligations, including managing advice fee consent,” Heine said.
Interestingly, only 19% of advice firms used a standalone system for fraud detection as the vast majority relied on solutions that were built into their existing systems.
The Australian Cyber Security Centre categorised financial advisers ‘critical infrastructure’, with past cases of cyber crime demonstrating that these types of organisations, alongside government bodies, were at a higher risk of online breaches.
Cyber security had become a critical issue in the advice industry following a Federal Court filing in May that RI Advice failed to adequately manage cybersecurity risks.
ASIC deputy chair, Sarah Court, said these cyberattacks on RI Advice were significant events that allowed third parties to gain unauthorised access to sensitive personal information.
“It is imperative for all entities, including licensees, to have adequate cybersecurity systems in place to protect against unauthorised access,” she said.
“ASIC strongly encourages all entities to follow the advice of the Australian Cyber Security Centre and adopt an enhanced cybersecurity position to improve cyber resilience in light of the heightened cyber-threat environment.”
