Digitising fund distribution due diligence – where collaborative compliance meets risk management
The third in our series of articles on making KYD – Know Your Distributor – work for you, your partners, clients, your brand and regulator looks at compliance automation: how to turn the due diligence questionnaire into a powerful tool.
As we have discussed previously, when investment managers agree to standardise questionnaires, it’s useful for all stakeholders. Distributors have to complete only a single questionnaire, making it more likely they will supply and update their data more quickly. Investment managers get continuous and more comprehensive insight into their distributor base.
Structuring and standardising questionnaire answers has another benefit. Instead of wading through spreadsheets, Word documents and pdfs, ume platform users have access to structured and consistent data. That enables them to apply risk-based algorithms to automate scoring and to identify outliers quickly and easily.
The number of distributors covered, and the volume of data received enable investment managers to identify patterns. A UK independent financial advisor may answer questions differently from a Swiss private bank or a German insurance company, but it will typically have a similar profile to its peers. That makes it easier to compare different types of distributor channels in other regions, and to identify outliers and abnormal profiles more quickly and where further investigation is required.
That ability is vital since reputational and regulatory risks can escalate from a poorly managed distribution network.
Typically, the ume process enables you to identify 80% of any distribution base as low risk, where distributor profiles conform to expectations and do not require further action. But what about the others? You can now focus on the 20% or so that represent a possible risk. Reducing the human workload for the distribution network as a whole frees managers to focus on what matters and deliver better results from their compliance efforts.
ume’s automated risk scoring helps our investment manager clients to quickly and proactively identify issues, facilitate further investigation and, if need be, take remedial action. Compliance teams undertaking more in-depth analysis can focus on their added value, spotting issues before they turn into a major problem. That should make your board, shareholders and, especially, regulators happy.
If you’d like to know more about how our powerful system can ease your regulatory burden through automation, we would love to tell you.