A recent survey of asset managers, broker/dealers, alternative managers and wealth managers found that compliance is now a core business practice of financial services firms, yet many are not yet devoting the financial resources toward making these programs truly effective.
Firms have been facing enhanced scrutiny for years: 81% of respondents stated that they are “concerned or very concerned” about the SEC’s current practice of identifying and prosecuting individuals. But now these firms also finding that their clients have come to expect a robust compliance function: 70% of respondents have clients who included this in their due diligence.
Financial services firms who have been most effective at this are assigning the compliance duty to the committees and individuals with sole responsibility in this function. However, according to the report, two years ago, compliance officers’ paychecks were decreasing and budgets were being cut in this area. With a dedicated compliance resource or function, firms benefit from:
- Reduced conflicts of interest
- Enhanced regulatory compliance
- Increased internal visibility for compliance issues
How much are they spending on compliance?
The industry benchmark is 5% of total revenues being spent on compliance, or two basis points of assets under management.
Some are outsourcing compliance functions
“57 % said they outsourced some or all of their compliance function, up from the 24% who outsourced in 2014,” said the report, according to ThinkAdvisor.
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