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WealthTech Views RegTech Report: The view from Apiax

Article from The Wealth Mosaic's WealthTech Views RegTech Report. Written by Ralf Huber, Co-founder, Head of Legal & Compliance, Apiax

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Apiax for Wealth Managers

A growing number of regulations discourage financial institutions from doing business globally and increase costs and risks for ambitious wealth managers. Apiax provides answers to wealth managers' most pressing regulatory questions, enabling them to realise more business opportunities, while keeping costs low and risks under control.

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by Apiax
| 22/07/2021 06:00:00

Company overview

Apiax is a suite of regulatory technology products that empowers financial institutions to realize business opportunities and minimise risks through embedding compliance requirements. Embedded compliance means integrating complex legal and compliance requirements into a wealth manager's key tools and processes.

Apiax’s embedded compliance solutions enable business leaders to make critical decisions faster, delivering answers to the financial industry's most pressing regulatory issues in real-time. It’s the easiest, fastest way for highly regulated entities to put the client at the heart of business operations.

Since launching in 2017, Apiax’s growing product portfolio has expanded to cover different fields of the financial realm, such as wealth management and asset management, as well as related data protection and tax topics. Working closely with the world’s top legal experts allows Apiax’s products to be up-to-date, ensuring reliability on verified compliance knowledge.

The company is headquartered in Zurich and is present in Lisbon, London, Singapore, and Frankfurt, boasting more than 70 employees across all regions.

Thought leader

Ralf has over 16 years of legal and compliance experience within the financial industry and holds a Master of Law from the University of Zurich. Starting his compliance career at Zürcher Kantonalbank, Ralf went on to perform a variety of different legal and compliance roles at Credit Suisse between 2005 and 2016, both in Switzerland and abroad. In his last role at Credit Suisse, Ralf managed a team covering all legal and compliance tasks for the investment services and products, asset management, and mutual funds business in Switzerland. Ralf has always been passionate about standardisation and leveraging technology to simplify the demands of modern legal and compliance work.

What are your views and insights on the use of RegTech today in wealth management?

In the space between wealth technology and the law, change can happen overnight. With digital toolkits and automated processes, wealth managers can go from compliant to non-compliant at the flick of a switch.

Like in most industries, technology was introduced in the wealth management sector to take the manual burden off employees while ensuring efficiency and accuracy. Over time, the heavily data-driven wealth industry has become dependent on its capabilities. But although it is designed to optimise the investment advisory process, technology and automation may also expose businesses to substantial compliance risks if they are not watchful.

Compared to other financial services, the wealth industry lags behind, with associations of poor customer service and simplistic or ill-fitting product recommendations. And for a long time, wealth managers have left their client-facing staff alone with all types of complex regulatory requirements. Legal and compliance departments would provide more ‘traditional’ advice through policies, email, or phone, making it very inefficient for client advisors to stay compliant.

In a sector prone to constant regulatory change, best practices enabled in wealth management software may become outdated overnight, making affected proposals less profitable, poorly suited to investors’ needs, or even outright non-compliant.

Planning a compelling investment proposal can be a complex and data-intensive process. Joining together the external regulatory and business environment with clients’ individual needs creates countless combinations of criteria and data points to take into account. To facilitate this process, wealth managers often use digital tools to build better portfolios and strategies reflecting this information. That said, even if comprehensive and sensitive to market trends, portfolio management tools may at times struggle to fully process all compliance requirements—especially in a cross-border context.

Our “Staying compliant across borders” survey shows how in a global world, with increasingly mobile clients, cross-border compliance is an almost universal issue, and even more so for large players in the wealth management space. Out of the 43 major financial institutions we surveyed, 93% provide services and products in multiple countries; 51% are dealing with over 20. This can imply that firms will often conclude that actively pursuing certain services and products on a cross-border basis is more trouble than it is worth.

Tax can be another trap. Tax deductions, once executed, are another element that can make or break any investment strategy. Local and international tax standards can be simplified or overlooked by inadequate wealth management software and may therefore be challenging to predict. As a result, tax-related miscalculations and under-performance can break trust and weaken the relationship between the firm and its clients, potentially causing broader reputational damage.

Technology is a key enabler for wealth managers wanting to deliver a competitive product offering and personalized client experiences. Although essential to firms worldwide, wealth technology does also carry significant compliance risks. In particular, digital investment management tools may fail to fully reflect the implication of complex regulatory standards involved in cross-border investment strategies.

Integrating a digital and standalone compliance layer, maintained and supervised by regulatory experts, into the wealth advisory environment is an effective way to align processes with international regulatory standards and internal policies. By replacing wealth management programmes’ default compliance assurance functions, wealth managers will benefit from the ability to provide predictable and viable investment advice—rather than it becoming a “black box,” with all the risks that implies.

From what we have learned, companies are also finding it difficult to continuously provide compliance expertise to business units as compliance teams move to remote or hybrid work. The answer is to operationalize and modernize compliance rather than have compliance and regulation as a largely analogue overlay. All financial institutions need to adjust their operating models, as well as standardize and automate whenever possible. This means embedding compliance into teams, processes, and products so that regulatory knowledge can be delivered in a context and role-specific way.

We see that more and more wealth managers have realized that smart compliance tools are key business enablers and are therefore replacing traditional text-based resources with digital solutions. With embedded compliance, companies can move away from the stringent, manual processes—where legal content needs to be maintained and updated manually—to more flexible processes where regulatory rules are embedded into existing processes and automatically updated by responsible legal and compliance teams.

When digital rules are embedded in a specific system or process (e.g. the investment advisory process), monitoring and controls are no longer required as the rules are checked “pre-activity.” Therefore, anyone using such a solution can move away from extensive training and risk-based controls and gradually move towards a smart and digitally powered low-risk organization. The impact on risk reduction and efficiency is evident.

As a pre-condition of embedded compliance, regulatory requirements must be transformed into digital, machine-executable rules. This transformation of regulatory content into binary yes-or-no answers makes complex regulatory requirements very easy to understand to those who need it, from relationship and wealth managers, to marketing teams and software engineers, who often struggle with mapping these requirements to all relevant business processes.

With a digital repository of rules at the center of the organization, stakeholders can get precise do’s and don’ts to specific regulatory questions they need in their daily work right away.

What solution(s) does your company offer the market and how do they help wealth management firms manage their risk and compliance obligations in a better way?

Financial institutions are facing an increasing demand for tailored advice and targeted investment products. They seek to introduce customized, value-added services. Moreover, private banks and wealth managers are faced with the challenge of needing to quickly and efficiently expand their business activities globally.

We strive to make it extremely easy for wealth managers and private banks alike to do their business. Our aim is to remove any friction or complications caused by regulatory restrictions and make compliance a business enabler. While we can’t change the regulation nor remove all restrictions, we can help firms boost profitability and cut compliance costs by going digital.

Digitizing compliance gives companies a new kind of flexibility to bridge the gap between compliance, business, and technology. Embedding compliance directly into wealth management systems removes barriers to financial institutions' global business. It enables them to reduce time-to-market and increase their revenue numbers at lower risks—all based on their existing technology infrastructure.

Together with our partners, we structure regulatory restrictions into binary rules and make them available to business units across financial institutions. Our clients not only benefit from the instant availability of regulatory knowledge but can also be sure that the quality of this knowledge meets the highest standards. This allows business leaders to make critical decisions faster, as it delivers them answers to the financial industry's most pressing regulatory issues in real-time.

Our intuitive suite of regulatory technology products also allows financial service providers to embed compliance into any business team, tool, or process and replace complicated paper-based sources, irregular compliance training, and countless one-to-one interactions with compliance. Moreover, we make those answers accessible via beautiful user interfaces and easy-to-use APIs.

We provide solutions for the following business scenarios:

  • Offering financial products and services across borders
  • Onboarding clients, with a focus on complex client structures
  • Clarifying data protection requirements, with a focus on data processing
  • Understanding tax implications of investment proposals
  • ...and many more!

In summary, Apiax is a business enablement solution for banks, wealth managers, and asset managers worldwide that helps them realize business opportunities and minimise risks.

This article was originally part of our Wealth Tech Views RegTech Report. Click here to access the full report.