This year already looks set to pile more pressure on the investment management community as both performance and principles face even greater scrutiny.
Since the financial crash, investment managers have been increasingly in the spotlight as investors challenge the fees charged and the real value of ‘active’ fund management.
A recent report from the think tank New City Initiative (NCI) also pointed to the burden of regulatory compliance as yet another headache for investment firms. The report – ‘How Regulation is Damaging Competition in Asset Management’, published last December – showed small and medium-sized investment firms feel hindered by regulatory costs, with many admitting they were reluctant to go it alone due to the complexities of compliance.
The advent of digital and social media and, more significantly, the resulting proliferation in communication and content channels is also proving taxing for businesses around the world.
In addition, with the Financial Conduct Authority (FCA) turning its eye to content management governance (following the publication of its initial social media guidelines), it is clear that the compliance conundrum will remain a real challenge for this sector.
All too often, expressions such as ‘compliance procedures’ and ‘data archiving’ are met with glazed looks, with good reason. Worse still, they can elicit fear among investment managers. But, in today’s digital world, with the FCA watching companies and their electronic communications more closely than ever, these terms need to be understood or even embraced, rather than avoided.
The reality is that archiving data and putting in place policies that can help businesses do this in a meaningful and cost-effective way is more straightforward than businesses think.
The starting point for any business has to be a social media usage policy. One of the critical steps in developing a sound policy is understanding the record-keeping and supervision regulatory requirements for social media.
The FCA has stated that it “recognises social media’s growing role in organisations’ marketing and communications strategies” and has even provided guidance on how to extend compliance programmes to this dynamic channel.
The regulators could be accused of stating the obvious. However, at least their actions go some way to recognising that it is the content of the communication, not the medium, that determines a message’s status as a business record.
The challenge from a regulatory perspective is how to keep pace with evolving technology and ensure that supporting guidelines are flexible enough to stay the course.
The bigger challenge for investment firms is to ensure that – once they know the ropes in terms of social media compliance – they focus on developing their own business content and style that focuses on their clients’ needs, so that they can reach their business goals more quickly.
There is a real opportunity for investment managers to capture the business benefits that social media affords and improve profitability while managing reputational risks. It is vital that investment managers feel confident about engaging with their clients through social media, but that will be possible only with the right amount of preparation and careful attention to detail.
