How tech is mitigating risk as the FCA clampdown on alternative investments
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How tech is mitigating risk as the FCA clampdown on alternative investments

18th March 2020

Earlier this year, the FCA announced that it would be placing greater scrutiny on alternative investments as part of its strategy to prevent financial harm to consumers. According to the regulator,  investors are too often exposed to investment opportunities that they are not qualified to access or received conflicting advice for their investment priorities and needs. As a result, the FCA has demanded that financial advisors take a client’s experience and understanding of the market into account when presenting deals.

Regulation cannot fall off the agenda.

It is fair to say that regulation needs to remain on the senior manager’s agenda; the fact that poor suitability checking can impact investors within the private market is nothing new. Back in 2012, alternative investments such as the unregulated collective investment schemes (UCIS) were criticised for mis-selling to up to 85,000 ordinary investors – putting them at risk in the process.

So what now? The FCA encourages financial advisors to ensure any advice given is suitable to the investor and that costs and charges are clearly highlighted. Similarly, any conflicts of interest must be flagged and identified. While regulation remains a challenge, technology is evolving and can help Wealth Managers, Private Banks and Investment Firms to protect clients and comply with governance standards.

How technology can help financial advisors become compliant

Technology can be a crucial enabler in terms of meeting regulations. It can help to manage compliance and governance more efficiently while ensuring consistency and reducing human error in the process. For example, the tech-driven platforms powered by Delio help to:

  • Manage the governance of deal distribution, ensuring that the right investors see the right deals at the right time

  • Ensure that all regulatory attestations, client classifications and appropriateness/suitability statements are fully documented, digitally executed and automatically renewed.

  • Integrate compliance workflows that span the whole investment lifecycle, while automated audit logs document mandatory requirements such as investor profiling, deal approval and much more.

  • Highlight any conflicts of interests as these can be disclosed on any investment opportunities

Of course, technology alone cannot decide what is in the best interests of a client. It is still essential for financial advisors to take responsibility and ensure that the advice they provide aligns with FCA standards. After all, no one wants to put their clients at financial risk. However, what technology can do is develop consistent processes, reduce potential risks and improve operational efficiency.

At Delio, we are proud to be FCA-regulated. If you want to see how our technology can help you to reduce risk in your private market proposition, please get in touch with us at team@deliowealth.com.