It’s a challenge that would be daunting even for a major bank or insurance company but one which must be terrifying for Independent Financial Advisers. IFAs should be busy advising on innovative new options for clients, not wading through rulebooks, fretting over personal data and negotiating copyright licences.
The cost of regulation to business has become so significant that in 2009 the government set up an independent public body, the Regulatory Policy Committee, to review the cost of regulation and ensure that new proposals took account of likely additional direct cost to business. The current government even set a target of reducing this cost by £10 billion during this parliament. It’s a laudable ambition but the real problem isn’t so much the cost of complying with specific regulations, but the cost of keeping tabs on all the rules a business might have to comply with.
Technology can certainly help financial advisers in making real progress through this minefield by scanning the regulatory horizon and in using AI to understand any rule changes that are detected. But the truth is there are simply too many rules from too many rulemakers in too many formats – many of them too poorly structured and vague for software to understand much less act on.
If a small firm genuinely tried to stay abreast of the full spectrum of regulation that could affect them, they would very likely never get off the ground at all. According to the think-tank JWG there will be 300 million pages of regulatory documents by 2020. Even if you burned 90% of them, it would still take an average person 5 uninterrupted years to read what was left. Which is about the life expectancy of an average start-up business. That is why it’s so important financial advisers stay on top of this changing sea of regulation, and wherever possible with the help of technology.
Without a sea change in the attitude of governments to how actively they intervene in business activity, innovation in financial services will drown in a sea of red tape. I hate to say it but maybe Donald Trump was actually right about something!