The Personal Investment Management & Financial Advice Association (PIMFA), a trade association that represents financial advisory firms and investment managers, has published the results of its third annual Risk Survey. The results are based on responses from 36 member firms, who were asked to state what they saw as their top five current risks and their top five risks moving forward and were then asked to rank these risks as high, medium or low.

The report opens with an observation that many firms have had to cope with implementing a number of new laws and initiatives, such as: the Markets in Financial Instruments Directive II (MIFID II), the General Data Protection Regulation (GDPR) and the forthcoming Senior Managers and Certification Regime (SM&CR), whilst continuing to address ongoing issues, such as the regulator’s focus on suitability of advice. The Association adds here that Brexit – when and if it eventually happens – may pose additional challenges for firms.

The top current risks were:

  • Regulatory risks (named as a top five current risk by 89% of respondents) – here PIMFA speaks of “the ever-increasing volume and detail of regulation in general”
  • Cybersecurity risks (cited by 81%) – here firms are asked to consider all of the effects a cyberattack could have, including regulatory enforcement action, difficulties in maintaining the client relationship, confidentiality issues and reputational damage
  • Brexit and other macro-economic uncertainties (42%) – the UK’s impending exit from the European Union could have direct consequences for firms that operate internationally, and all firms could potentially suffer if Brexit results in an economic downturn
  • Staffing and retention (36%) – external factors such as Brexit concerns might have led more staff to remain with their existing employers
  • Profit margins and cost disclosure (31%)

The top emerging risks were:

  • Brexit and other market and political instability (cited by 58%) – here the Association comments that Brexit uncertainties have affected firms for some time. The referendum took place in June 2016 and the exit date may now have been put back to October 31 2019
  • Regulation risks (39%)
  • Technological change (25%) – as well as keeping pace with new technologies, many firms face issues with upgrading their legacy IT systems
  • Business growth and client risk (17%)
  • Staffing and retention (14%)

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

Adviser trade body publishes results of its risk survey of firms