Jump to main content

CEO Insights

Reexamining Our Relationship With Regulatory Requirements

Ten years ago, I switched banks. I took all of my deposits out, filled out the necessary forms and ended the relationship because I couldn't download my data to Quicken. I'm quite sure my bank was thinking, "Who would switch? We have nice branches!"

But they never got ahead of my needs. The investment servicing industry faces the same threat, and it's missing a mighty opportunity to remedy it: Regulation.

In waiting to act until it's forced to act, and in viewing regulations as a burden rather than a prompt for innovation, the industry has become so caught up in what regulators ask for that it's forgotten what regulations are for – and for whom.

The regulator is not the client. The investor is the client. But somewhere along the way, the investor got cut out of the conversation.

Remembering the Investor

Regulators step in because the industry hasn't stepped up. Demand for actionable, timely data is growing, and the middle- and back-office professionals in the investment servicing world will have to do more to instill trust in this $1 trillion industry. Right now, they do just enough and gripe about it.

But the places where investors feel safe putting their money in the future will be those that embrace the seemingly insatiable need for data and knowledge. As a whole, the industry isn't there yet: When investors see the Dow going up but don't have the resources and data to track their own investments against it, and they then feel – mistakenly or not – that they're not achieving the same performance, that's a giant fail.

Regulators demand timely data because investors need it – and aren't getting it. Regulators demand actionable reporting because investors need it – and aren't getting it. Regulators demand frequent communication because investors need it – and aren't getting it.

Maybe it's the industry that isn't "getting it."

Increased regulation is a wake-up call that the investment industry is not innovating, not responding to client needs, and not staying ahead. Reacting isn't full client service; and going forward, it won't be enough to retain market share. We're already reaching the point where people say, "You know, this isn't OK anymore. I need to be able to see what my retirement account has in it right now, and it has to be integrated with my other assets, and that information can't be spread all over hell's half-acre." And once that happens, you're either in position, or you're out.

It's time we wagged our own tails and looked at rules and regulations as prompts to create advantage or differentiation in the way we provide information – and to go even farther by anticipating the investor needs that will drive future regulations.

In five years, if you can't explain what your investor is going to want or need, then you're not going to be in a position to respond and to service that need. You're not going to be able to create meaningful differentiation.

And that investor is going to bother with the forms, the signatures and the time commitment to take their investment to someone who can.

Our website uses cookies for analytics and to improve your site experience. By continuing to use our website, including remaining on the landing page, you agree to our use of cookies in accordance with our privacy policy.