The General Data Protection Regulation (GDPR) will have a huge impact on the way investment and wealth managers handle and protect their data, according to a seminar run by law firm Wedlake Bell.
The Financial Firms Fit for the 21st Century panel seminar, the first of a series of events run by Wedlake Bell in conjunction with Lanware, a financial services outsourced technology provider, and Investment & Wealth Management Consultants (IAWMC), debated drivers for change in the investment and wealth management sector.
A key topic on the agenda was data protection with the panel asserting that it needs to be accepted that firms will fall victim to a cyber-attack, but the focus is needed on detection, response and remediation.
GDPR was ranked the most significant regulation regarding data management and protection by 81 percent of the wealth and investment managers who attended the seminar, ahead of MiFID II (15 percent) and the Common Reporting Standard (CRS) (four percent). The introduction of the GDPR will mean that firms will have to adhere to more stringent practices, ensuring that data is better stored with adequate checks and processes in place to protect it.
Rosalyn Breedy, corporate & financial services partner at Wedlake Bell, commented: “We need to stop regarding regulatory change as a series of sequential siloed projects. Through a multi-disciplinary approach to data management, firms will be able to better protect their data. The GDPR presents an opportunity for wealth and investment managers to assess the risks to their client data and implement procedures to deal with any data breaches.”
It was revealed that 46 percent of the seminar participants hold data in more than four places and 40 percent hold their data in two to three places – only six percent of the attendees said they held data all in one place. Ms Breedy added: “It is no longer a case of if your firm’s data will be breached, but when. Therefore taking a multi-disciplinary approach which encompasses IT departments, as well as HR departments, will be key in dealing with any breaches. Directors also need to understand that they have statutory and fiduciary duties to protect the assets of the company and risk being held personally accountable for loss.”
The seminar also revealed that two-thirds (69 percent) of those surveyed believed that outsourcing will increase considerably in the next three years. Panellist Steve Dyson, founding director of IAWMC stated that operational outsourcing is now beginning to take a componentised approach, which allows wealth and investment managers to concentrate on their core capabilities, whilst outsourcing its peripheral activity to third parties.
However, while evolving technologies have been linked to this increase in capabilities, firms themselves are not adept in taking up innovative technologies, despite individuals being receptive to public cloud technology. Some 62 percent of the seminar respondents agreed that public cloud services can be adopted in financial services in a secure and compliant manner.
Panellist Henry Duncombe, managing director of Lanware, noted that on average 34 percent of a firm’s IT budget is spent on investing in new technologies, with the remaining 66 percent spent on running current systems. He stated that despite all the advancements in technology, firms had not become more efficient over the last five years and reduced their running costs.
Before considering further technology investments, it is vital that IT leaders demonstrate more discipline in decommissioning legacy technologies, he noted. Outsourcing can help address this challenge by transferring the responsibility to a third party provider.
There has been steady consolidation in the industry and this is set to continue with M&A activity as the main source of growth in the sector, according to the seminar with 38 percent thinking there will be a significant increase in activity, whilst just over half (55 percent) said that there will be a moderate increase.
In addition, the panel also stated that the advancement of new technologies and increased competition, including from agile start-ups, are factors which have played a crucial role in the shortening of company lifecycles.
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