More than nine in ten finance and accounting professionals (92%) are optimistic about increased automation in the profession, according to new research from Renaix.

The study, which questioned over 200 finance and accounting professionals, reveals that 81% are seeing their role impacted by emerging technologies, such as advanced data analytics (63%), cloud computing (42%), robotics (17%) and artificial intelligence (15%). This increases to more than nine in ten (94%) who believe these technologies will impact their role in the next five years.

Yet, despite the increasing role of technology, only 12% of those questioned believe their job will be completely automated within the next five years, with most seeing new tools as an opportunity rather than threat. Two thirds (69%) say automation will enable them to be more efficient, over half (59%) say it will allow them to add greater value to clients and 40% say it will reduce the amount of transactional work they’re involved in.

But that doesn’t mean there aren’t challenges, with more than half (59%) of respondents having to learn new skills to keep up with technological developments, with data analytics (54%), soft skills (54%) and working with new technologies (51%) coming top of the list.

Many are also worried about skills shortages over the coming years, particularly in data analytics (52%), STEM (science, technology, engineering and maths – 42%), and soft skills (31%). Furthermore, a quarter (25%) of those questioned say their employer still isn’t investing in upskilling the finance function to work with new technologies.

Paul Jarrett, Managing Director at Renaix, comments: “Emerging technologies are set to transform the finance and accounting sectors, with many professionals already feeling the impact on their day-to-day responsibilities. And it’s encouraging to see that, far from being intimidated or threatened by these new ways of working, the majority of professionals are excited and optimistic, believing automation will improve and expand their role in the coming years.

“Finance and accounting organisations have a fantastic opportunity to drive forward digital transformation, empowering all employees to play their part in developing and implementing new ways of working. However, to do so effectively, employers need to ensure they are equipping the workforce with the right skills, as well as investing in bringing in the right talent. While there will always be a need for traditional finance and accounting skills, we’re seeing a significant rise in demand for a broader range of backgrounds, particularly those with STEM qualifications. Businesses therefore need to plan their talent needs effectively, to ensure they stay ahead of the game.”

(Source: Renaix)

Without a doubt, 2017 has been a rocky year for financial services; with political upheavals, economic uncertainty and planning for numerous regulatory changes coming into effect in 2018.

In 2017, Brexit was the talk of the town, with “uncertainty” a word bouncing around the finance sector. As such, the key focus was on the financial services industry crafting their post-Brexit strategy, namely how to continue having access to both EU and UK markets and in turn catering to their clients’ needs.

According to Brickendon, while political events will continue impacting financial services, including Brexit negotiations, next year digitalisation and data will dominate alongside Robotic Process Automation and Blockchain, making larger waves in the sector and paving the way for uncapped growth and innovation.

1. A Data Future. Access to it, and the ability to mine data, will be central to everything that happens in the future of financial services. Now that the data is loaded, and the toolsets are understood and available, 2018 will see it being used for operations and technology processes.
2. The Rise of Robots. Robotic Process Automation (RPA), which uses software robots or ‘bots’ to mimic human activity, has the potential to unlock yet more value by freeing up employees to focus on value-added work – ultimately transforming the way the financial services sector operates. In 2018, we will see how this will impact RegTech, data analytics and ultimately how organisations service their clients. A gamechanger for the industry will be the start of the processes to replace people with robotics and machine learning.
3. The Reality of Blockchain. The use of the distributed ledger technology will no longer be just hypothetical. The opportunities for financial services who invest in such technology are endless from reducing operational costs to improving efficiency.
4. Simplifying Digitalisation. Business is becoming more about the user experience. Automated user interfaces can go a long way to helping this and embracing digitalisation is key in making it happen. The upcoming year will be all about the simplification of processes and digitalisation.
5. The Changing Political Climate. Brexit will remain a buzzword and continue to make headlines. As more details of the UK’s departure from the EU become clear, we will see banks and institutions adapting accordingly. Many will have to keep a close eye on their strategy if they are to survive and thrive in 2018.
6. Banking Regulations. 2018 will be a turning point for financial regulation. Alongside General Data Protection Regulation (GDPR) and Markets in Financial Instruments Directive (MiFID II), the requirements for central clearing and the second Payments Services Directive (PSD2) will force significant changes to the banking environment, with the innovators and disrupters emerging as the winners.
7. FinTech Collaboration. One of the largest technology shakeups in banking in recent years has been the use of advanced data analytics techniques to catch rogue trading activities within banks. In 2018, banks will have to decide whether to service clients in house or through a third party to stay competitive.

(Source: Brickendon)

Here discussing the increased adoption of connected devices and sensors in banking and how IoT enables banks to respond in real-time to customer needs, is Neil Bramley, B2B Client Solutions Business Unit Director at Toshiba Northern Europe.

Internet of Things (IoT) technology is on the rise both at home and in the workplace, and will soon significantly impact and empower the way we live and work. To date, such solutions have arguably made a bigger splash in the consumer landscape than B2B, with connected fridges, cars and thermostats all resonating with the public. As consumers awareness of IoT grows, so too does their expectation that it will blend into their everyday consumer experience. No business is seeing this effect more than those in the financial industry as more IoT technology incorporates payment capabilities.

The case for financial organisations to introduce IoT into their internal infrastructure and consumer facing technology capabilities is gaining in strength, with solutions providers continuing to innovate and push the boundaries of what such technologies can achieve. The whole concept of IoT is that it can be anything organisations want and need it to be – all it takes is the right app or piece of code to be built around it. At this stage in its adoption, many IT managers in financial organisations don’t necessarily understand the potential of IoT. Given the personal, and often sensitive, nature of the data these organisations manage a fear of data and network security persists, particularly in the wake of recent global cyber-attacks. However, such concerns aren’t projected to hold the market back for long, with IDC research predicting that global spending on IoT technologies is forecast to reach nearly $1.4 trillion by 2021.

The scope of IoT solutions is evolving to fuel this demand. Whereas stationary M2M (machine to machine) solutions, such as sensors, kick-started the connected device market and remain popular, mobile IoT solutions provide vast opportunities across numerous sectors – helping to improve workflows, enhance interactions with staff and customers, and even improve the safety of workers. Key to this development is the introduction of peripherals to the workplace, which can be partnered with mobile gateway solutions to ensure cross-machine collaboration.

One natural example lies within banking. The increased adoption of connected devices and sensors will bring increasingly rich data to banks about their customers, allowing them to provide more personalised products and services, even enabling them to respond in real-time to customer needs. As connected technology becomes imbedded in our environments, and the connected home and smart city market matures, banks could provide real-time spending advice. For example if you have overspent on your budget that month your bank might suggest you avoid your usual Friday lunchtime treat.

Elsewhere, peripherals like smart glasses (wearable display technology) can ensure a hands-free solution to workers across a range of roles. Augmented Reality could give insurance sales teams a in-depth view of customers homes geographical locations and provide them with a better analysis of potential risks in order to give them a better deal, or provide a hands free look at a customers financial history enabling the creation of bespoke products and services.

Beyond devices themselves, operating systems will also play a crucial role in the progression of IoT in the financial services world. Currently the focus is very much on writing software for iOS and Android – a smartphone-onus which again signifies the advanced stage of the consumer market. Yet the natural progression is for solutions providers to expand their focus to incorporate Windows 10 – this will serve as a catalyst in creating a greater number of solutions designed for professional use, which in turn will inspire more financial organisations to turn their attention to developing IoT coding and apps to address different business needs.

It is only a matter of time until IoT becomes a major enabler for organisations across the finance industry – with such game-changing potential, it’s important for IT managers to get ahead of the curve to understand how these technologies can empower their business.

If everyone is one step ahead of the competition, how is it possible for anyone to be one step ahead? The FinTech sector is currently facing a complex situation where start-ups are one-upping tech giants, and vice versa, on a daily basis. So how is it possible to maintain an edge in the industry? Finance Monthly hears from Frederic Nze, CEO & Founder of Oakam, on this matter.

The financial services industry has entered the Age of the Customer -- in this era, the singular goal is to delight. With offerings that are faster, better and cheaper, new fintech entrants have the edge over traditional institutions who struggle to keep pace with consumers’ rising expectations around service. Yet this is not the first or last stage in the industry’s evolution. Just as telephone banking was once viewed as peak disruption, so too will today’s innovation eventually become the standard in financial services.

What will become of today’s new entrants as they scale and mature? The answer largely depends on why a particular fintech company is winning with customers today -- a hyper focus on problem-solving.

If customer review site Trustpilot is used as the litmus test for customer satisfaction, then clearly banks and other traditional financial firms are falling short of the mark. Looking at the UK’s Trustpilot rankings in the Money category, not a single bank appears in the top 100, and their ratings range from average to poor. Fintech entrants like Transferwise, Funding Circle and Zopa, on the other hand rank highly in their respective categories.

So how is it that such young companies have elicited such positive responses from consumers, beating out institutions with decades of experience and customer insight?

The advantage fintechs have over banks is that their products are more narrowly focused and are supported by modern infrastructure, new delivery mechanisms and powerful data analytics that drive continuous user-centric improvement and refinement. Still, they’ve had to clear the high barriers of onerous regulatory and capital requirements, and win market share from competitors with entrenched customer bases.

The halo effect of innovation and enthusiasm of early adopters, hopeful for the promise of something better, has buoyed the success of new entrants and spurred the proliferation of new apps aimed at addressing any number of unmet financial needs. This of course cannot continue unabated and we’re already approaching a saturation point that will spark the reintegration or rebundling of digital financial services.

In fact, a finding from a World Economic Forum report, Beyond Fintech: A Pragmatic Assessment Of Disruptive Potential In Financial Services, in August this year stated that: “Platforms that offer the ability to engage with different financial institutions from a single channel will become the dominant model for the delivery of financial services.”

Whether a particular app or digital offering will be rolled up into a bank once again or survive as a standalone in this future world of financial services, will depend on the nature of the product or service they provide. This can be shown by separating businesses into two different groups.

Firstly, you have the optimizers. These nice-to-haves like PFM (personal financial management) apps certainly make life easier for consumers, but don’t have competitive moats wide enough to prevent banks from replicating on their own platforms in fairly short-order.

For the second group, a different fate is in store. These are offerings that are winning either on the basis of extreme cost efficiency (the cheaper-better-fasters) or by solving one incredibly difficult problem. Oakam belongs to this second category: we’re making fair credit accessible to a subset of consumers who historically have been almost virtually excluded from formal financial services

The likely outcome for the cheaper-better-fasters, like Transferwise in the remittances world, is acquisition by an established player. They’ve worked out the kinks and inefficiencies of an existing system and presented their customers with a simpler, cheaper method of performing a specific task. However, their single-solution focus and ease of integration with other platforms make them an obvious target for banks, who lack the technology expertise but have the balance sheets to acquire and fold outside offerings into their own.

Integration into banks is harder to pull off with the problem-solvers because of the complexity of the challenges they are solving for. In Oakam’s case we’re using new data sources and methods of credit scoring that the industry’s existing infrastructure isn’t setup to handle. In other words, how could a bank or another established player integrate our technology, which relies on vastly different decision-making inputs and an entirely new mode of interacting with customers, into their system without practically having to overhaul it?

For businesses who succeed at cracking these difficult problems, the reward is to earn the trust of their customers and the credibility among peers to become the integrators for other offerings. Instead of being rebundled into more traditional financial firms, these companies have the potential to become convenient digital money management platforms, enabling access to a range of products and services outside of their own offering.

Self-described “digital banking alternative,” Revolut was first launched to help consumers with their very specific needs around managing travel spending, but today has offerings ranging from current accounts to cell phone insurance. While some of their products are proprietary, they’ve embraced partnership in other areas, like insurance which it provides via Simplesurance. This sort of collaboration offers an early look at the shape of things to come in finance’s digital future

One might ask how the digital bundling of products and services differs from a traditional bank, with the expectation that the quality and customer experience will diminish as new offerings are added. A key difference is PSD2 and the rise of open banking, which will enable closer collaboration and the ability to benefit from the rapid innovation of others. What this means is that an integrator can remain focused on its own area of expertise, while offering its customers access to other high quality products and services

At Oakam, this future model of integrated digital consumer finance represents a way to unlock financial inclusion on a wide, global scale. Today, we serve as our customers’ first entry, or re-entry, point into formal financial services. The prospect of catering to their other financial needs in a more connected, holistic way is what motivates us to work towards resolving an immediate, yet complicated challenge of unlocking access to fair credit.

Henny Woon Loong is the Chief Trust Officer for Wealth Planning in DBS Private Banking. He has oversight of all existing trust client relationships, as well as trust policies, documentation, pricing, product development and business acceptance. Henny heads the Wealth Planning team in Singapore, which provides personal trust, estate planning and liquidity planning services to clients of DBS Private Banking and DBS Treasures Private Bank. Here he tells Finance Monthly more about it.

What more can you tell us about DSB Private Banking – what are the company’s history, mission and values?

DBS Private Bank is a unit of DBS Bank, a leading financial services group in Asia, headquartered and listed in Singapore. The bank's capital position, as well as "AA-" and "Aa1" credit ratings, are among the highest in Asia-Pacific. We’ve been named the Safest Bank in Asia for seven consecutive years by Global Finance.

Our deep knowledge of the region, complemented by an extensive Asian network across 18 markets, and an open architecture platform, allow us to offer innovative Asia-centric solutions and services to meet the needs of our clients, both at a personal and corporate level. Our recent acquisition of Société Générale’s and ANZ’s private banking businesses in Asia, has significantly increased the scale of our wealth management business globally and expanded our suite of products and services to better serve our clients’ needs.

In DBS, we take a holistic approach to private banking. Growing our clients’ wealth is important. But so is protecting that wealth when our clients transfer their wealth to the next generation. This is what we call Wealth Planning.

What are the different types of Trusts in Singapore, and how can they be beneficial? What are the best options for protecting assets and wealth from political, social, economic or personal uncertainty? How can tax liabilities in Singapore be planned for and dealt with efficiently to mitigate their impact?

Singapore is a reputable international trust centre. Trust companies here are licensed and supervised by the Monetary Authority of Singapore (“MAS”). The judiciary in Singapore is highly respected and the industry is supported by legal, tax, and financial services firms, both home-grown and international. Our trust law, built on well-established English legal principles, was modernised in 2004. In Singapore, discretionary trusts with investment powers reserved to settlors are very common. These trusts may be revocable or irrevocable, depending on the clients’ objectives.

To provide a conducive environment to foster the growth of wealth management, qualifying trusts administered in Singapore are able to utilise a number of tax incentive schemes. Before these schemes sunset on 31^st March 2019, MAS will conduct a review to assess their usefulness and relevance.

What are the typical challenges that clients approach you with in relation to the management of their finance and trust planning? What challenges are often faced where trusts are concerned?

Trusts are a core element of many wealth plans. Families have used trusts for centuries to preserve their wealth and make long-term financial provisions for their heirs. This basic need for succession planning has not gone away, and indeed may be even more critical in today’s dynamic environment.

5 or 10 years ago, perhaps the single biggest concern for many clients about using trusts was the loss of control. What has changed since is a heightened awareness of tax amongst our clients. As you know, the financial world is today characterised by increasing transparency, encapsulated in the now-familiar alphabet soup of FATCA, CRS and AEOI.

What makes DBS Private Banking’s Wealth Planning departments unique?

Wealth planning is more than simply a conversation about trusts. Indeed in some cases, a trust is not necessary or even advisable. It all depends on each client’s circumstances and objectives. To take an example, trusts may not work for some European clients and alternative structures such as insurance may be more appropriate. In DBS, the wealth planners are not the sales force for our trust company; our job is not to sell trusts. We are very clear that our role is to make sure that our clients get the right advice.

So our wealth planners engage our clients on wider issues that may affect intergenerational transfers of wealth. We are working with many clients to set up single family offices, primarily to ensure there is continuing professional management of their investments after their lifetime. We also find an increasing number of clients who want to make charitable and philanthropic objectives as a key family value, maybe even the key family value, that they want to instil in their descendants. Our clients are also keen to address foreign taxes that apply to their overseas investments, as well as family members who move outside their home country. At the end of the day, every client has different needs and objectives.

Website: https://www.dbs.com

Email: hennyliow@dbs.com

Lindsay Leggat Smith is a Scottish solicitor who has worked in the international trust and company services field in Monaco for some 30 years. Following the recent acquisition of Carey SAM in Monaco by international professional services provider Equiom Group, Lindsay continues to serve as Chair of the Monaco operations, where a significant part of the business relates to cross-border inheritance issues, an area in which Lindsay has considerable practical experience.

What are currently the hottest topics being discussed in relation to wills and probate in Monaco?

Without a doubt, the hot topic of the moment is Monaco’s enactment in June of this year of Law No. 1.448, which brings welcome clarity to many facets of private international law. These include such matters as the competence of the local courts, recognition of foreign judgements and public documents, conflict of laws, various forms of contractual obligation and importantly, matters involving the person being capacity, marriage, divorce and separation, adoption and maintenance provisions. Inheritance (“Succession”) is dealt with at Chapter V of Section II. The principal change relates to the introduction of the concept of professio juris into Monaco law. While this principle, which allows individuals to choose the law applicable to certain of their activities, is now to extend to several areas such as marriage, divorce and separation and certain contracts, its effect is likely to be felt mainly in the field of inheritance.
Monaco is henceforth aligned with the principal provisions of the European directive, allowing choice of law in matters of inheritance, with the choice now being available between the law of the place of last domicile or the deceased’s national law. Nationals of common law countries who reside in Monaco may thus now submit the administration of their estates to their respective national law as opposed to the civil law of Monaco, their place of domicile. This can often be of interest to testators unfamiliar with local law who are reluctant for it to be applied to their estate, and in particular the civil law principle of forced heirship. Law 1.448 has the effect of extending to simple Wills the essential features of Monaco’s Law No 214 of 1935, which still regulates Will Trusts written by common law nationals in Monaco. Failure to make a choice will result in Monaco law being applied to its full effect.

What are the challenges associated with operating in this sector?

Monaco is home to individuals of 130 different nationalities, so the main challenge of catering to the inheritance needs of this clientele stems from the huge diversity of the issues which can present themselves. These are often very complex, involving questions of law and taxation, in particular in several jurisdictions at once - in circumstances where the heirs of a deceased Monaco resident are themselves located in different countries. Complex family relationships also arise in cases where a deceased may have children from several marriages. Executors and Trustees often find themselves facing questions which go beyond matters of estate administration. The work is stimulating and allows a great deal of interaction with our network of colleagues and contacts overseas.

What do you think lies on the horizon for wealth management?

Opinions will differ, but it may turn out that the effects of the seemingly unstoppable rush to transparency in all walks of life will dictate or at least greatly influence wealth management strategy for the immediate future. Beneficial Ownership and Trust Registers, FATCA and CRS automatic exchanges of information, and Legal Entity Identification numbers for securities transacting in Europe are all measures designed to track and record investments and assets held by individuals and, to a lesser extent, businesses. These latter are, however, subject to no less intrusive controls at various levels. Leakage of information through investigation, theft, hacking and the like will be exploited on social media. The overall result will be a continuing drive towards investments which are beyond reproach, transparent, fully reported and taxed, and socially sustainable.

Carey SAM recently became part of Equiom– could you tell us a bit about the acquisition?

Carey SAM in Monaco joined Equiom Group in late September but we are already seeing the impact of this exciting new development. The acquisition process was most harmonious and it is obvious that we share many common values. Equiom is a multi-jurisdictional business with offices in many leading international financial centres. The Group’s focus is entirely aligned with ours – attaining the best possible outcomes for our clients, wherever they are and whatever their needs. Being part of Equiom Group will give us that extra reach and opportunity to work with our new colleagues towards that goal.

Website: www.equiomgroup.com

With MiFID II looming, finance businesses across the UK will be reviewing their practices to ensure the way they work complies with the new regulations. Here, Alex Tebbs, Founder at VIA, explains what the regulations mean for the way we communicate as businesses, and how your business can comply come January 2018.

MiFID II is a targeted regulation update that aims to improve transparency and better protect both providers and customers of the finance sector.

In that sense, it exists to make things better for everyone; but with the January deadline looming and uncertainty still rife around the impact of Brexit on the update, many in the finance industry are still considering the best way to achieve compliance in their business.

It’s a regulation update made up of many facets, one being the requirement for businesses to record their communications in any instance where that conversation results in, or intended to result in, a transaction. Those communications must be retained - and be accessible when called upon - for five years after the event.

Creating a post-MiFID communications plan

In many ways, the communication requirements of MiFID II make a lot of sense. By recording our conversations, we can be sure that we are serving our customers in the best way, and that they are protected from any potential misunderstandings or misdemeanors.

But in today’s multi-device, multi-location business landscape, compliance isn’t so simple. While once we would have communicated on one device (likely a landline) and from one office, the reality of business today is that we often use multiple devices (and even encourage colleagues to bring their own devices) and operate across multiple locations, including remote working from home, offices in different countries and communications on the move.

This presents a challenge for finance professionals. How do we achieve compliance in this complex communications landscape?

The best place to start is with a review of your existing communications plan as a business. You’ll need to work out what platforms and devices are used to communicate, and make a record of all of those, as they will need to be included in your recording strategy. Be aware that this mightn’t be as straightforward as it sounds, and it’s likely to take time to uncover all the comms platforms in use.

The next step is then to work out how best to record those communications. On a landline, this would require hardware such as a microphone plugged into the handset. There are various apps that make it possible to record calls on a smartphone or via clients like Skype.

An alternative to this somewhat clunky process is to invest in a unified communications platform. This brings all your communication tools - smartphones, landlines, Skype, instant messaging, text - onto one platform which can be easily controlled from one portal, making recording and keeping those conversations a much easier, quicker process.

However you choose to manage your communications, one thing is clear; you will need to be able to both record, and keep, those conversations from January when MiFID II comes into play.

Security considerations in communications

It certainly won’t have passed by your attention that another sizeable regulation update is taking place in 2018; namely, GDPR, an update to data protection rules.

With GDPR putting renewed emphasis on security - and with MiFID’s requirements for comms recording - security should be placed firmly atop the agenda of financial firms.

There are various options on how we achieve security in communications. The most universally relevant and powerful is that of end-to-end encryption; with the main risk of unsecured comms being that communications could be intercepted en route, end-to-end encryption removes this risk by making the information, even when intercepted, entirely useless.

For those businesses using a unified communications platform, encryption and many other security considerations are included as standard, with large investments being made by those companies into stress testing their platforms and removing any vulnerabilities as soon as they are considered as a potential risk factor. For those using separate communications channels, a strict security testing strategy will need to be in place to ensure all communications are safe and private.

In terms of retaining those recorded conversations, security is a concern once again. Secure servers and storage areas are a must; consider also who has access to these recordings, and ensure they have a signed agreement in place that complies with data protection rules, and that your business’ data protection processes are up to date - especially as GDPR hits in May 2018.

MiFID II and the communications landscape

There is much left unknown about how MiFID II will affect finance businesses in the long run, and it’s likely that the implementation of its regulations will uncover complexities that need to be clarified as we move into the new year.

With that said, the communications element is prescriptive; finance professionals must record and maintain a record of all communications, regardless of device, platform or location. Is your business ready?

The Top 5 Impacts of GDPR on Financial Services

The clock is ticking to the 2018 deadline to comply with the EU General Data Protection Regulation (GDPR). Acting now is critical for firms to avoid risking fines of €20m (or 4% of annual revenue) so advance planning and preparation is essential. Here Nathan Snyder, Partner at Brickendon, lists for Finance Monthly the top five considerations and impacts GDPR will have on financial services.

Amidst growing concerns around the safety of personal data from identity theft, cyberattacks, hacking or unethical usage, the European Union has introduced new legislation to safeguard its citizens. The EU General Data Protection Regulation aims to standardise data privacy laws and mechanisms across industries, regardless of the nature or type of operations. Most importantly, GDPR aims to empower EU citizens by making them aware of the kind of data held by institutions and the rights of the individual to protect their personal information. All organisations must ensure compliance by 25^th May 2018.

While banks and other financial firms are no strangers to regulation, adhering to these requires the collection of large amounts of customer data, which is then collated and used for various activities, such as client or customer onboarding, relationship management, trade-booking, and accounting. During these processes, customer data is exposed to a large number of different people at different stages, and this is where GDPR comes in.

So, what does the introduction of GDPR actually mean for financial institutions and which areas should they be focussing on? Here Brickendon’s data experts take a look at five key areas of the GDPR legislation that will impact the sector.

1. Client Consent: Under the terms of GDPR, personal data refers to anything that could be used to identify an individual, such as name, email address, IP address, social media profiles or social security numbers. By explicitly mandating firms to gain consent (no automatic opt-in option) from customers about the personal data that is gathered, individuals know what information organisations are holding. Also, in the consent system, firms must clearly outline the purpose for which the data was collected and seek additional consent if firms want to share the information with third-parties. In short, the aim of GDPR is to ensure customers retain the rights over their own data.

2. Right to data erasure and right to be forgotten: GDPR empowers every EU citizen with the right to data privacy. Under the terms, individuals can request access to, or the removal of, their own personal data from banks without the need for any outside authorisation. This is known as Data Portability. Financial institutions may keep some data to ensure compliance with other regulations, but in all other circumstances where there is no valid justification, the individual’s right to be forgotten applies.

3. Consequences of a breach: Previously, firms were able to adopt their own protocols in the event of a data breach. Now however, GDPR mandates that data protection officers report any data breach to the supervisory authority of personal data within 72 hours. The notification should contain details regarding the nature of the breach, the categories and approximate number of individuals impacted, and contact information of the Data Protection Officer (DPO). Notification of the breach, the likely outcomes, and the remediation must also be sent to the impacted customer ‘without undue delays’.

Liability in the event of any breach is significant. For serious violations, such as failing to gain consent to process data or a breach of privacy by design, companies will be fined up to €20 million, or 4% of their global turnover (whichever is greater), while lesser violations, such as records not being in order or failure to notify the supervisory authorities, will incur fines of 2% of global turnover. These financial penalties are in addition to potential reputational damage and loss of future business.

4. Vendor management: IT systems form the backbone of every financial firm, with client data continually passing through multiple IT applications. Since GDPR is associated with client personal data, firms need to understand all data flows across their various systems. The increased trend towards outsourcing development and support functions means that personal client data is often accessed by external vendors, thus significantly increasing the data’s net exposure. Under GDPR, vendors cannot disassociate themselves from obligations towards data access. Similarly, non-EU organisations working in collaboration with EU banks or serving EU citizens need to ensure vigilance while sharing data across borders. GDPR in effect imposes end-to-end accountability to ensure client data stays well protected by enforcing not only the bank, but all its support functions to embrace compliance.

5. Pseudonymisation: GDPR applies to all potential client data wherever it is found, whether it’s in a live production environment, during the development process or in the middle of a testing programme. It is quite common to mask data across non-production environments to hide sensitive client data. Under GDPR, data must also be pseudonymised into artificial identifiers in the live production environment. These data-masking, or pseudonymisation rules aim to ensure the data access stays within the realms of the ‘need-to-know’ obligations.

Given the wide reach of the GDPR legislation, there is no doubt that financial organisations need to re-model their existing systems or create newer systems with the concept of ‘Privacy by Design’ embedded into their operating ideologies. With the close proximity of the compliance deadline – May 2018 – firms must do this now.

Failing to do at least one of the following now: a) identify client data access and capture points, b) collaborate with clients to gain consent for justified usage of personal data, or c) remediate data access breach issues, will in the long run not only cause financial pain, but also erode client confidence. A study published earlier this year by Close Brothers UK, found that an alarming 82% of the UK’s small and medium businesses were unaware of GDPR. Recognising the importance of GDPR and acting on it is therefore the need of the hour.

Against the backdrop of transformative technologies and the latest regulations, Graham Lloyd, Director and Industry Principal of Financial Services at Pegasystems, identifies for Finance Monthly what types of challenges financial services will have to navigate in their journey through 2018.

Successful social media – The growing discrediting of social media content and its practices comes at an awkward time for banks. The last thing they need is association with anything that could contribute more mistrust to their profile, but they cannot afford to ignore a powerful channel with such reach and strong links to here-and-now impact. It will be interesting to see how banks learn to handle social media with success.

Evolving customer engagement – Social media is just one element of customer engagement and there are far bigger issues on the horizon – digestibility, cost and effectiveness. Data mining is now so huge and its outputs so great that we should perhaps be referring to ‘big insights’ as there are so many of them. For most players, the problem is how to work out which insights to leverage within whatever time and budget constraints prevail.

Time to tackle trade finance – With trade finance risk-weighting kicking in properly in March 2019, we are entering the home straight for finalising the necessary business changes. Most players will presumably look to offset some of the costs of introducing capital requirements in this hitherto largely unweighted portfolio by seeking greater productivity/process efficiencies.

The truth is out about challengers! – Thus far, challengers and Fintechs have been portrayed as somewhere between a benediction and a panacea. The great generic USP – “we’re not a traditional bank” – has helped them weather all sorts of issues from low take-up to sub-optimal IT to almost-but-not-quite products, with scarcely a hard question asked. But the honeymoon period may be drawing to a close, and even in combination, they have still to take any serious market share away from big/traditional banks.

Possibilities of PSD2 – In the final run up to PSD2, there are sizeable revenue opportunities for a bank positioning itself as the ‘destination of choice’ for PISPs (Payment Initiation Service Providers). These new players will gravitate towards the banks offering a higher service standard and the least hassle, as the effects will flow through to the PISPs’ own customers and their expectations of security, certainty and convenience. Banks stand to recapture not only some of their own lost transactions, but also some which have flowed out of their competitors.

CAPITALIUM ADVISORS® is an independent wealth management company based in Geneva, offering premium services for international clients. More than a name, CAPITALIUM ADVISORS® revolves around people and values. Its founders, Alain Zell (CEO), Clement Schoeb (CFO) and Sebastien Leutwyler (CIO), share a passion for endeavors, abide by common values and adhere to a collective vision to redefine wealth management and its practices. In tune with a new generation of clients, the associates of CAPITALIUM ADVISORS® understand evolving expectations as well as the stakes that are at play. They offer an innovative approach, built on rigor and excellence.
Here, Finance Monthly speaks to the company’s CEO – Alain Zell who tells us all about the company’s beginnings, the services it provides and their plans for the future.

How did the idea about the company come about?

CAPITALIUM ADVISORS® was born of our determination to become independent, in order to guarantee our clients the highest possible standards of service and without any conflict of interests.

Wholly owned by Clement Schoeb, Sebastien Leutwyler and I, CAPITALIUM ADVISORS® is not a part of any financial establishment. This allows us to deliver services completely independently and with the standards of excellence that we have imposed on ourselves. Our added value is based on a firm commitment with two objectives: protecting and expanding our clients’ assets.

Tell us a bit more about the principal services the company provides and its priorities towards its clients?

We develop solutions especially for our clients, whether families, the emerging generation of millennials, or entrepreneurs. These offerings were not designed for our clients, but with them for the purpose of simplifying the financial component of their life equation.
We take a three-pronged approach:
CASA INVEST: We manage discretionary mandates, consultancies and supervisory services. Our investment landscape covers all types of financial assets and monetary bases. We implement tax-efficient management, in the structures and in the investments we select.
CASA NEXGEN: Our proprietary concept; it is the non-financial branch of the CAPITALIUM ADVISORS® services. It is targeted above all to families, helping them tackle challenges related to the transmission of patrimony. We offer an ecosystem built upon three pillars that the young generation interacts with on a regular basis: investment, education and mentoring.
CASA ADVICE: We help our clients to maintain total control over their private affairs, with a team of professionals who master the challenges and increasing complexities of today’s environment. Our company has equipped itself with state-of-the-art tools that allow for granular monitoring and analysis of financial assets.

How has the company grown in terms of operations and service offering in the past year?

We have stayed the course while focusing on our sole objective of disrupting common practice while offering our clients a unique financial experience. CAPITALIUM ADVISORS® is now one of Switzerland’s most important asset management firms. With our partner, SCHOEB FROTE® in Neuchâtel, in 2017 we exceeded the billion-dollar mark in AuM. Clearly, what clients are seeking more than ever is a relationship based on trust in which the lack of conflicts of interest allows a dialogue that goes to the essentials – preserving, growing and guaranteeing the transmission of their assets.

What differentiates Capitalium from its competitors?

While banks focus on staying profitable by cutting costs and raising prices, we do just the opposite – we constantly invest in enhancing our offering. This is the only to create concrete and tangible added value. Merely cutting costs is the reaction of those who are unable to renew their offering and adjust to clients’ new expectations.
On the portfolio management front, we have two requirements. First, we manage by convictions and avoid the "soft consensus" at all costs as it undermines performance over the long term and marginalizes risk control. Second, we privilege "open architecture" financial products. This guarantees us access to the best providers and the expertise of specialists. These requirements are accompanied by a clear code of conduct: refusal to receive retrocessions, no bias towards highly marginal products, no unjustified portfolios turnover and a systematic hunt for "hidden costs".
Foremost, performance is what drives our decisions and recommendations. We also consider factors such as flexibility and efficiency to optimize our output. Models borrowed from core-satellite institutional investors inspire our work. The choice of tools revolves around indexed vehicles and investment funds, which we supplement via investments in direct lines, derivatives, structured products and real assets.

If you could share one piece of advice with Finance Monthly’s readers, what would it be?

In most cases, clients customarily diversify by entrusting their assets to several different managers, including both banking establishments and independent asset managers. While the need for counterparty risk diversification is an accepted fact, this is not as true for the way that assets react once they have been invested. The reason for this is that, while all asset managers claim to be different, investment management profiles have inevitably converged, due to regulatory constraints (standardised risk profiles), temporary profitability biases (retrocessions and high-margin products), and the fear of losing mandates (benchmarking to reduce the risk of underperforming the competition). This has, in turn, increased the financial risk that is inherent to portfolios.

To address this bias and offer more structural and robust diversification in wealth management, it is becoming necessary to combine several different investment approaches. Taking a unique approach is, in itself, one way to diversify risk and manage family assets on a solid basis for the long term. With this in mind, CAPITALIUM ADVISORS® has developed a three-pronged model that aims to guarantee the greatest visibility and traceability possible in investments. By reducing the asymmetry of information that too often exists between managers and clients, we provide clients with all the tools for objectively evaluating the work done and making informed decisions. This makes clients participants in the management of their own assets.

“We say what we do and do what we say”: in portfolio management we stand out in the way that we strategically overweight or underweight assets in a clear-cut manner, as dictated by our analysis of the financial markets. Accordingly, we eschew “cosmetic” transactions, which are too often used to mask a lack of conviction in portfolio management.

“Before making comparisons, accept that it’s fine to be different” : in contrast to the “fog machines” that are too often used by the financial industry to explain away performances, we want to avail CAPITALIUM ADVISORS® clients of instruments that help them precisely measure the quality of services provided to them. To do so, we have entered into a contract with IBO, a firm that audits returns adjusted to real levels of risk and compares them to the main Swiss investment managers.

“Optimising one’s financial ecosystem”: based on each client’s investment management profile, we seek to determine which counterparties and suppliers of financial products are most able to allow us to stay within the commitment we have made to our clients that their total fees will not exceed 1%, hidden fees included. This is what we consider to be the fair price for wealth management. What’s more, this enhanced efficiency has a direct impact on performance by reducing the risk incurred on a constant-expected-return basis.

In addition to the more entrepreneurial and contemporary model that CAPITALIUM ADVISORS® offers its clients, wealth management, like many other businesses, is based above all on the notion of trust. And trust can’t be forced; it must be earned over time. We do believe that it’s possible to earn this trust through an approach offering full transparency on the business model, the absence of conflicts of interest, and an uncompromising investment management process.

What are your goals for the future?

Within a few months, CAPITALIUM ADVISORS® has positioned itself definitively as a player able to offer a true alternative to traditional banks. CAPITALIUM ADVISORS® will continue to expand both organically and externally while continuing to demonstrate the added value of a business model that is close to its clients and with no conflicts of interests. Backed by common sense, hard work, boldness and enthusiasm, we ensure that we are positioned to implement our ambitious plans.

Contact details:

CAPITALIUM ADVISORS® SA
16, rue de la Pélisserie
CH – 1204 Geneva
Phone : +41 22 544 63 00
Fax : +41 22 544 63 09
www.capitaliumadvisors.ch
info@capitaliumadvisors.ch

By Andy Barratt, Managing Principal Financial Services & Payment Solution Assessment at Coalfire

The fall-out from the Equifax hack has, understandably, focused on the millions of people who have had data stolen, but far less attention is being paid to the wider implications for the financial services industry.

Financial services providers, in particular, rely heavily on credit ratings to vet potential customers, with Equifax being one of the major providers of this information in the UK.

Businesses across the sector need to ask themselves whether they can consider the data they receive from Equifax is reliable. Pleading ignorance is not an option, now that the hack is public knowledge, and the onus is back on financial services providers themselves to ensure they are lending responsibly and securely.

 It’s well known that the credit rating services provided by the likes of Equifax, Experian and Callcredit are integral to modern lending processes. The depth of information and immediacy they offer is, for many, simply not achievable otherwise. With this reliance in mind, the broader impact of the breach for the sector could be significant and long-lasting.

Should the extent of the breach be more far-reaching, it might be too late by the time the industry knows that records at Equifax have been manipulated.

The impact of the breach

The first, and more widely discussed, impact of the Equifax breach is the potential for the individuals whose data has been stolen to be a victim of identity fraud.

 The number of people affected by this particular incident has been reported widely and is now reasonably understood to be in the millions. This puts an abundance of vital personal information at the fingertips of unscrupulous individuals across the globe.

 The second key factor to consider is the systemic impact on the financial services industry. Especially in an environment where increasing amounts of business are carried out without any face-to-face interaction with the customer and automated, rapid decision making used.

 For the growing number of online-only businesses, it can be very hard to know if an applicant is who they say they are – especially if the credit rating provided by a third party is potentially compromised. While the affected data will have been flagged as stolen, we don’t know if the cyber-thieves changed any of the original records at source.

 If the source data at Equifax has been manipulated, false identities could go undiscovered giving fraudsters a greater chance of success. Stolen data can be used to create fake identities, falsify credit histories and enter into relationships with lenders that would otherwise not be possible.

 Criminals could also have made individuals appear more credit-worthy than they are in reality. This might result in over lending to sub-prime or near sub-prime individuals in a manner that may well be judged irresponsible by regulators.

 Of course, many lenders use multiple sources alongside their own records to verify loan applications.

But for those relying heavily (or solely) on Equifax data to support their decision making, it is vitally important to evaluate the level of dependence and whether a new approval process needs to be put in place.

Ensuring data reliability

At this stage, completely abandoning Equifax might be overcautious, but a review of how their data is utilised is a must.

Businesses need to start a dialogue with the credit ratings agency immediately. Equifax should be forced to disclose what measures have been put in place to alert both consumers and financial institutions to fraudulent data, how they are identifying the people affected and what new practices are being implemented to ensure data security and integrity in the future.

It will, of course, be down to individual companies to decide whether the evidence provided by Equifax is satisfactory.

If it is not, firms that rely heavily on this agency, should consider other partnerships so that data can be corroborated. Anomalies can be identified by comparing information provided by two or more ratings agencies, potentially uncovering a fraudulent application.

In this vein, firms may also be able to further leverage existing customer data to sense check a new application. For example, if an existing customer’s circumstances or credit worthiness change drastically from one application to the next, this should raise flags.

Common-sense checks such as this are an interim measure, but will help judge the reliability of data while assurances from Equifax are sought and more long-term strategies put in place.

Long term, it will be up to the regulators to decide if Equifax can really be relied upon by the global financial services community. Any rulings or advice on Equifax’s reliability could have significant implications for the financial services industry’s dependency on a small number of credit rating agencies.

If Equifax’s trustworthiness is called into question, it could be a tipping point that opens the door to a new type of ratings agency.

Financial services is in a transformative phase with new ‘challengers’ emerging all the time. Online-only banks like Monzo are capitalising in an industry that is already amenable to change. The sector should watch on with interest for comment from the FCA that could impact Equifax’s role and keep an eye out for potential partnerships should new rating providers enter the market.

The truth is that Equifax and the service it provides is deeply entwined with the financial services sector. So much so that wider implications from the data breach are inevitable. It’s fundamental now that the sector ascertains whether its lending processes are still reliable and make the necessary changes if they are not.

About the Author

Andy Barratt is Managing Principal for Financial Services and Payment Solution Assessment at Coalfire, a cyber security consultancy which works with many businesses across the financial services sector.

Website: https://www.coalfire.com/

The UK’s Banking and Financial sector has experienced a strong quarter, despite ongoing uncertainty caused by the Brexit negotiations, according to figures recently released in the Creditsafe Watchdog Report. The report tracks quarterly economic developments across the Banking and Financial and 11 other sectors (Farming & Agriculture, Construction, Hospitality, IT, Manufacturing, Professional Services, Retail, Sports & Entertainment, Transport, Utilities and Wholesale).

Sales are up 4.19% from Q2, and the number of active companies and new companies have both increased by 5.9% and 8.5% respectively over the same period. This is supported by the rate of company failures, which has dropped by 4.0%. Total employment has also increased by over 1% in Q3.

The research shows a continued return to form for the Banking and Financial sector in terms of these core metrics. However, the financial health of the sector has been hit as the volume of bad debt owed to the sector has increased by 118.8% in Q3, with the average amount of debt owed to companies coming in at £246,318. Suppliers bad debt, the volume owed by the sector, has also seen a big increase of 127.1%.

Rachel Mainwaring, Operations Director at Creditsafe, commented: “While today’s Creditsafe Watchdog Report show signs of optimism for the UK’s Banking and Financial sector, despite the ongoing political and economic uncertainty throughout Europe and beyond, the levels of bad debt seen in Q3 are a serious cause for concern.

“One company, Pearl Finance Co Ltd, is responsible for over £80 million of bad debt owed to other sectors and we can see the potential for contagion if debt spreads across businesses in the UK. With a big increase in bad debt owed both to and by the Banking and Financial sector this quarter, we’ll need to keep a close eye on the industry over the coming months to see if it can rebalance.”

(Source: Creditsafe)