How new technologies can simplify regulatory and compliance challenges


“We are drowning in information, while starving for wisdom. The world henceforth will be run by synthesizers, people able to put together the right information at the right time, think critically about it, and make important choices wisely”. E. O. Wilson

If you’ve been reading industry press, you’ll have noticed that 2016 was a year dominated by large licensee “issues”, FinTech hype and paranoia about “robo advice”.

Isn’t it curious that despite the recurring, systemic and profound licensee “issues” paraded in the press, the dialogue of professionalism mostly ignored the “capacity” of the licensees themselves? While advisers were pressed to adopt new systems, improve compliance and embrace professionalism, licensees clung to manual reporting, multiple spreadsheets and myopia.

Did you think it odd that there was so little focus on RegTech despite the inordinate and relentless focus on vertical integration, adviser conduct and professionalism?

Without an effective strategy to manage their compliance and regulatory risks, advisers and advice businesses remain vulnerable to litigation, regulatory action and reputation risk. Worse still, they too often ignore the customer experience while struggling to manage complex, and frequently changing requirements.

“In an uncertain macroeconomic and financial environment, applying RegTech could make an important contribution to increasing .. profitability and efficiency .. while improving … effective compliance with financial regulation” [1]

While industry professionals have been clamouring to minimize risks more effectively and improve productivity, many businesses have still not adopted the agile technology solutions that a professional licensee requires. While some early adopters have embraced RegTech to reinforce their advantage over their competitors, others still cling stubbornly to the past and ignore international and domestic trends. The Regulators’ expectations, and the international trends, are clear, but even in the absence of these known facts, the commercial benefit of adopting RegTech is profound; increased efficiency, increased profitability and reduced “barriers to entry”[2].


RegTech in simple terms

FinTech refers to the innovative application of new technologies, such as machine learning, blockchain and cloud computing, to financial services and the creation of new products and services that are more effective, more accessible or otherwise superior to existing options. RegTech is the innovative application of new technologies to create solutions to better manage regulatory, compliance and governance issues in financial services.

For advice businesses, RegTech can run from systems that aggregate “wholesale data into statistical, relational, geospatial and behavioural analysis”[3] to monitoring culture and behaviour to identifying new regulations to recording and embedding the licensee’s measures, processes and procedures. Add complaints and incident management, induction tools, qualitative advice assessment and comparative analysis and you have the core elements of an effective RegTech solution. It will be scalable, secure and objective.

In Australia, most specialised RegTech solutions for advice businesses are built around a CRM and relational database that has a hierarchical structure and clear taxonomy. Given that the purpose of RegTech is to ease your compliance burden, it should provide

  • A "single source of truth”;
  • A practical and effective risk management framework; 
  • A secure library for all reports, policies
  • Risk and conduct based adviser assessments (tailored to activities and roles);
  • Automated and flexible workflows (including integrated remediation and consequence management;
  • Granular reporting and benchmarking;
  • Embedded advice metrics, analytics and trend analysis;
  • Consistent and fully auditable management of complaints, incidents and breaches; and
  • Scheduling and reporting tools.


Why RegTech is necessary

“Financial supervision is increasingly driven by data, with regulators requiring data of greater granularity and at a greater frequency” [4]

With increased complexity, uncertainty and scrutiny, licensees need agile solutions like never before. Rather than hope for the best using spreadsheets and stressed staff, the best companies are embracing agile regulatory technology (RegTech) to easily satisfy compliance obligations while pushing their strategic management ever forward.

“By making compliance less complex and capacity demanding, regtech solutions could free capital to be put to more productive uses, increase competition by removing a barrier to entry, improve the quality and efficiency of supervision, and reduce risk in the system” [5]


Buy, Build or Lease?

How could any responsible licensee fail to adopt a scalable RegTech solution that simplifies and standardises compliance processes, eliminates manual and duplicate checks and frees up capital and internal resources?

Conservatism is often less of an issue than cost (although some managers baulk at increased transparency and comparability). Even assuming Licensees have the internal regulatory expertise to create their own solution, purchasing new equipment, software, servers, and then paying to maintain them (and paying for additional IT help) can be a daunting expense.

However, in-house equipment is not the only answer, and in-light of other solutions, it isn’t always even the best one.

Outsourcing isn’t a new trend by any means, but engaging regulatory technology solutions is a novel and burgeoning trend. As ASIC acts, and as the Directors of Licensees begin to recognise the limitations of their current compliance arrangements, RegTech moves from a “nice to have” to a “need to have” for reasons far beyond the obvious compliance issues.

In the United States, outsourced RegTech is fast becoming the most viable solution for managing increasingly strict compliance standards. From regulatory reporting to fair valuation procedures, agile cloud-based subscription platforms are supplementing (and sometimes replacing) internal compliance resources. It’s tempting to see this as simply a commercial decision to free up capital and focus limited resources more intently on growth, but the reality is a scalable, shared utility that measures compliance and provides real-time reliance is the better commercial decision.

RegTech in Australia is a niche and emerging service. Despite the proven capability of SaaS providers, the trend for most Licensees has been to try to improve their compliance by hiring more staff, engaging generalist consultants and trying to improving the competency of their risk managers. There’s nothing wrong with these strategies, but a review of recent regulatory actions (and any Fairfax publication) suggest that less expensive, and less resource intensive options, might be more effective. Any outcome focused-business should recognise the compelling value the sound safety net provided by a cutting-edge compliance solution.


How can RegTech help?

Scalable, cloud-based platforms that ensure flexibility, consistency and compliance (at a reasonable cost) are attracting the attention of licensees of all sizes. The reality is that independent, rather than institutional, licensees have been quicker to adopt industry SaaS solutions. While institutionally-owned groups are hostages to their internal bureaucracies, legacy systems and control models, independent licensees are often free to pursue better options and courageous enough to embrace objective assessment.

A RegTech SaaS solution, like OpenAFSL, operates in realtime, provides streamlined functionality and continues to evolve. RegTech can’t be static; it needs to react to regulatory changes but it also needs to anticipate those changes and support the Licensee’s strategic vision. Responsiveness and real expertise is critical. It needs to be secure, intuitive and cost effective. OpenAFSL was built by regulatory experts, developers and licensees to provides advice businesses with the level of technology support they need to enjoy sustainability and increased productivity.

“RegTech companies need to show themselves as having expert knowledge of a specific problem and an ability to solve it” [6]


Are You in Love Yet?

E O Wilson was right. In our experience, most Licensees are drowning in disconnected, incomplete and disjointed information. Worse yet, they’ve promoted reports over analysis and insights. Access databases, word documents and excel spreadsheets are cobbled together to do jobs beyond their capacity and beyond the capabilities of those staff asked to extract “BluRay” quality insights from “Betamax” systems.

It’s an ineffective and unsustainable proposition. The reality, as Deloitte recognised in their 2016 report, is that

“data is meaningless unless it is organized in a way that enables people to understand it, analyse it and ultimately make decisions to act upon it.”[7]

This is the “job to be done” for RegTech and, in this respect at least, it’s often spectacularly effective. In fact, RegTech is the clear and compelling alternative to increasing compliance costs, uncertainty and complexity.

Unless you’re operating a micro-business, if you haven’t fallen head over heels for RegTech yet, you simply haven’t recognised that it is the clear and compelling alternative to increasing compliance costs, uncertainty and complexity. Ultimately, investing in RegTech is less an investment in industry best practice than an investment in the sustainability and relevance of your business.





OpenAFSL is a finalist in the 2017 Fintech Awards - "Compliance Innovator of the Year". To find out more visit their website or email









[1] Institute of International Finance, March 2016 “Regtech in Financial Services: Technology solutions for compliance and reporting” p3

[2] Institute of International Finance, October 2015 “Regtech: Exploring solutions for regulatory challenges” p3

[3] Institute of International Finance, March 2016 “Regtech in Financial Services: Technology solutions for compliance and reporting” p21

[4] Institute of International Finance, March 2016 “Regtech in Financial Services: Technology solutions for compliance and reporting” p6

[5] Institute of International Finance, March 2016 “Regtech in Financial Services: Technology solutions for compliance and reporting” p3

[6] Barry McMackin quoted in Deloitte 2016 “RegTech is the new FinTech: How agile regulatory technology is helping firms better understand and manage risks”

[7] Deloitte 2016 “RegTech is the new FinTech: How agile regulatory technology is helping firms better understand and manage risks”