Sylvia Yarbough
Regulatory expert and former Head of Compliance
Throughout 2024, I've connected with various compliance leader colleagues in the financial services sector to gauge their opinions on some of the burning issues of today.
Despite the varying sizes and stages of growth of their organizations, similar themes have surfaced in our conversations.
Two common denominators are the increasing cost of compliance, both in technology and talent, and issues recruiting experienced compliance professionals to build out/expand compliance programs.
The geographic footprint did not seem to play a factor in their priorities. By asset size, I have identified key business goals and implications on the compliance programs of these organizations.
For those below $5bn in revenue, survival amidst larger competitors and emerging FinTechs is paramount.
Compliance leaders prioritize building lean teams, returning outsourced functions back in-house, and focusing on risk assessments and internal controls.
Top priorities include:
- Conducting more accurate risk assessments
- Improving internal controls and testing
- Risk issues identification and mitigation
- Compliance budget re-think
- Recruiting experienced compliance professionals
In the $5bn to $10bn bracket, expansion is key. Compliance efforts concentrate on demonstrating robust risk management to pre-empt regulatory constraints, emphasizing risk assessments, internal controls, and fair lending.
Major priorities include:
- Improving risk assessment processes
- Enhancing internal controls and testing
- Identifying and resolving key business threats
- Fair lending protocols
- Establishing and clarifying 1st and 2nd line risk roles and controls
- Governance routines including Board oversight
- Completing compliance budgets
- Recruiting experienced compliance professionals
Approaching $100bn, organizations are dealing with heightened regulatory scrutiny. Compliance strategies are pivoting towards program maturity, with an emphasis on stronger risk assessments, more compliance training, and governance strengthening.
Major priorities include all the above, plus ensuring compliance with unfair, deceptive, or abusive acts or practices (UDAAP) regulations.
For those surpassing $100bn, growth remains the priority alongside managing regulatory risk. Compliance is focused on emerging risks, internal control enhancements, and proactive issue identification, all while bolstering compliance talent acquisition.
Aside from what has been covered previously, leaders are focused keenly on emerging risk, and supporting business growth grounded in strong compliance programs.
Wealth Management
In this space, the business and compliance focus are slightly different, as the industry is experiencing new entrants and amid significant consolidation
Aging populations and wealth turning over to the next generation is impacting client retention, whilst income from assets under management and related fee income remain challenges.
Larger, more mature firms are struggling to introduce more sophisticated technology such as Artificial Intelligence (AI) to keep up with the wealth management FinTechs.
There is still a strong belief that customers follow their advisors, so larger firms continue to recruit from their competitors. This has created a very high-priced sales workforce, while areas such as compliance are not funded as comparatively. The next year is likely to be a strain for compliance functions.
The primary focus of leaders includes:
- Marketing and advertising compliance
- Compliance budget management
- New and/or younger business partners’ compliance and risk knowledge gaps
- Recruiting the right talent
Compliance leaders’ key tips
- Get creative: Your budget is set but often you can negotiate how dollars are spent.
- Limit your focus: Not everything you need to get done can get done focus on the highest priorities.
- Review constantly: Look at your existing technology and see if you can leverage its use in other ways or connect with RegTech firms that offer more inexpensive SaaS technology.
- Outside help: Consider compliance retirees or others ramping down their careers to get compliance talent and skills needed and help support the upskilling of your existing team.
- Risk assessments: Identify the risk in the business initiatives and practical solutions to mitigate to show your business partners you are collaborating with them, not against them.
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