A study by Canada Life has demonstrated that the UK’s financial advisers still see compliance risk as their biggest risk area. However, perhaps the main message from the survey is that 71% of the advisers who participated think that the risks they face have risen over the past five years, while only 2% said the risks they face have decreased.
When asked to state their single biggest risk area, 34% cited ‘compliance risk’. Not only does this represent one-third of the respondents, but more than three times as many advisers mentioned this when compared to ‘time management’, which came second on 11%. Economic risk was third on 9% and this area covers a variety of external factors, such as market volatility, the potential effects of Brexit and the general health of the UK economy.
When advisers were able to mention several risk areas, 72% mentioned compliance risk. Economic risk now ranked second, at 50%, with time management third on 47%. In fourth place, 38% of advisers mentioned cyber risk.
However, when advisers had been asked to name their single biggest risk, cyber risk was only mentioned by 5% of respondents, ranking below legal risk, economic risk, time management and compliance risk. This has led to some commentators suggesting that many within the industry continue to underestimate the threat posed by cyber criminals.
When asked to name their preferred strategies for reducing the risks they faced, 43% of respondents mentioned technological advances. In second place, 38% mentioned reducing costs.
Neil Jones, Tax and Wealth Specialist at Canada Life, said:
“The range of challenges in front of advisers is massive – they need to cut costs, reduce compliance burden through efficiency, appeal to an always-on generation wanting always-on answers, and defend themselves from cybercrime, to name just a few.
“Risks are moving smaller advisory firms to embrace technology at unprecedented levels. There is some low hanging fruit for advisers, with automating part of the back-end business being one example. Potentially this can help increase efficiency, cut costs and, done right, may help reduce the regulatory hassle by automating part of the compliance burden.
“The challenge for smaller firms will be achieving this while keeping a tight lid on costs. Unlike larger firms, they’re a lot less likely to be able to employ a full time, IT specialist in house. Freelance wealth IT specialists could find themselves increasingly in-demand in the coming years.”
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