Using the method espoused in the ESMA guidance, almost 20 per cent of cases that should have been reported were not reported (with around 450 individual notifications being generated during a peak day).
Additionally, contrary to the accepted industry view, very few clients actually invoked a panic sell and we found only two instances where clients switched out of their model and fled to safer grounds.
So, numerous concerns about the ruling’s effectiveness seem ill-founded. However, whether it was a lack of budget, underestimation of how much effort was involved, scepticism as to whether this piece of regulation was here to stay, or scepticism on how frequently they would need to report, many firms did not build or buy in automated, elegant and seamless reporting solutions.
This meant that when firms needed to report, which our research shows were regular events, it was manually intensive and made it an operational burden that carried a lot of risk. This was demonstrated by some high-profile instances where platform technology got it wrong.
This did not need to be the case as there was technology available to make this a seamless and automated process in the form of micro-services. Along with the general scepticism of the regulation, this is why I believe it was scrapped.
If we strip it back to basics and try to understand what the regulation was trying to achieve, there must be some reuse of the surrounding technology that could benefit the customer or something from the regulation we can reuse.
More regular alerting to better inform investors through consistent accurate reporting of portfolio performance can’t be a bad thing, surely? Wouldn’t it be a good idea to tell customers when their portfolios move 10 per cent or more over a period – be that positively or negatively?
We want clients and customers to be better engaged (at the right times) with their portfolios so alerting with positive performance could build that trust and encourage them to invest more, especially as our data shows the concern over panic selling was unfounded.
With a more robust and automated process, and consistency with other performance reporting, this could be something of great benefit to wealth management firms and their clients.
We have all the tools and technology available to make this a seamless process. Let’s recycle, not throw away. After all, single-use anything should be a thing of the past in 2023.
Tim Williams is business development director at FinoComp
