2. 2 WMA Risk Survey 2016
FOREWORD
Welcome to the second year of the WMA’s Annual Risk Survey. This report aims to provide timely
information on the industry and the issues affecting our members.
The report is based on the findings from our survey with this year’s providing greater narrative in so that
respondents (Risk Officers) were assessing risk in terms of their business.
We will also be drawing comparisons from our 2015 survey and what movements there have been within
our firms and the industry in general.
The research aims to gauge the industry’s perceptions of risk, regulatory developments and what are the
issues impacting wealth management are throughout 2016 and beyond.
REGULATIONS IN THE LAST 12 MONTHS
Over the last twelve months there has been an increase in the volume of regulatory changes the firms
have had to address, such as MIFIDII/MIFIR, PRIIPs, and MAD/MAR, which will continue over the next
twelve months. Meanwhile firms have had to continue to address ‘business as usual’ issues such as
Suitability and CASS.
The Brexit result may provide further challenges to be addressed.
Therefore, as expected and continuing on from 2015, we see firms focusing on regulations and how best
to manage this.
Broadly, the majority of risks highlighted into our 2015 study remain at the forefront of firms in levels of
importance. However, there were some interesting shifts in the ranking of risks within the study. Staffing
and Fraud/Cyber Security showed increased levels of importance, illustrating a movement in the focus of
firms and their perceptions of risk within the industry.
Noelle Buckley
Head of Research
3. 3
ABOUTTHESURVEY
THE WMA RISK SURVEY WAS CONDUCTED TO
PROVIDE AN OVERVIEW OF THE CURRENT AND
EMERGING BUSINESS RISKS WITHIN THE WEALTH
MANAGEMENT SECTOR.
IT IS BASED ON:
• The survey had responses from 31 member firms.
• A roundtable was then conducted to debate the
results and gather further feedback from members.
• Further feedback and analysis has been provided by
WMA staff.
THE SURVEY:
• Respondents were asked to list their top 5 current
risks within the wealth management sector in 2017
andbeyond.
• These risks were then ranked in terms of high, medium,
low risk.
• Respondents were asked to describe the criteria
applied when determining these risks.
GENERAL POINTS OF NOTE:
• The respondents ranged from private banks, wealth
management firms and stockbrokers.
• Respondents had a risk or compliance background
depending on the size of the firms.
The Wealth Management Association would like to thank
our members who participated in our survey and in our
roundtable.
4. 4 WMA Risk Survey 2016
KEY FINDINGS
CURRENTRISKSINTHEWEALTH
MANAGEMENT SECTOR
REGULATORY RISKS CONTINUE TO BE THE
LEADING RISK OVERALL AMOUNGST
RESPONDENTS
As in our 2015 study, regulations remained the top of mind
risk and the highest ranked overall risk. MiFID was once
again the most cited regulation with concerns including the
failure to comply and the ever increasing volume and
complexity of regulations.
CYBER SECURITY AND FRAUD INCREASED
IN RATING IN 2016 TO 71% (56% 2015)
Firms’ awareness of Cyber Security & Fraud is increasing.
What may previously have been perceived as an IT issue is
now recognised as a risk that affects the whole of the firm
and is, therefore, a firm wide responsibility.
There is also the growing recognition of the knock on effect
a cyber-attack can have on reputations of firms and
damage it can cause to the client relationship.
Firms also attributed the move upward to an increasing
awareness through published instances of cyber-crime
within the industry.
STAFFING MOVED UP TO THE RISK
RANKING FOR 2016 TO 42% OVERALL
COMPARED TO 19% IN 2015
The issue of staffing has pushed through significantly. The
ongoing regulatory agenda has meant that Risk and
Compliance function is a specialist area that is continually
needing to be bolstered.
There is a ‘key man dependency’ for some roles and firms
fear the risk of losing those individuals.
Some staff may have a long service with firms and can be
reluctance to introduce junior staff to their clients.
Succession planning is therefore a continuing issue which
will be exacerbated by the SMR.
Some respondents noted that the pay expectations are, at
times, too high in relation to the experience and calibre of
the spectrum of candidates. This may be down to the
knowledge of some candidates that there is a need for
further specialised staff e.g. in areas such as Risk and
Compliance in light of the ongoing regulatory burden.
Adding to this there are consultants in the market that
charge highly and have high pay expectations to move to a
firm.
There is a need for staff members with greater flexibility
and broad skill set as well as expertise in one particular
area. Assessing skills, attitude and cultural fit remain of
high importance.
Where some members are changing their strategic
business goals it is important that staff culture goes in
tandem and that new hires look to be a fit for the
changing culture rather than retaining old values.
SUITABILITY HAS MOVED DOWNWARDS IN
RANKING IN 2016 AT 39% (53% IN 2015)
Suitability is largely regarded as a business as usual issue
now for firms. It is still very much on the radar but the
focus has moved to ensure the competency of staff
through training.
OTHER BUSINESS ISSUES
When considering current risks a number of themes
emerged. Respondents did consider data integrity,
outsourcing, systems and operational resilience as risks
that are impacting on the wealth management industry.
5. 5
KEYFINDINGS
EMERGING RISKS IN THE WEALTH
MANAGEMENTSECTOR,2017&BEYOND
THE THEME OF REGULATION CONTINUES
TO BE THE TOP RISK FOR 2017 AND
BEYOND
Regulations and their implications continue to be
the top rated risk for firms when thinking about the
business risks that will affect them in 2017.
As with 2016 the challenges remain the same with
concerns over complexity and value being the
most cited concern.
Brexit was mentioned as a potential issue in 2017 but
the feedback was provided prior to the referendum
result.
Looking forward IT is seen as a key emerging
issue. According to firms they face a multitude of
challenges such as IT systems integrity, effective
monitoring and the issue of outsourcing.
In contrast to 2015, when considering future risks 48% of
respondents were able to list 3 or more (22% 2015).
This would indicate a stronger pattern of future
planning and forecasting potential risks among firms.
2017
6. 6 WMA Risk Survey 2016
KEYSTATISTICS
The top 5 risks
for 2016 overall
as listed by
respondents:
81% Regulations
71% CyberSecurity&Fraud
42% Staff Resources
39% Suitability
26% Market Uncertainty
29% of
respondents
mentioned
Regulations as
their top of mind
risk for 2016
The top 5 risks
overall for 2016 &
beyond as listed
by respondents:
29% Regulations
26% Brexit
26% Technology
19% Cyber Security & Fraud
16% Competition
Top criteria for
assessing current
&emerging risk:
56% LikelihoodofImpact
36% FinancialImpact
34% BusinessImpact
34% ImpactonCustomers
32% ImpactonReputation24% of
respondents
mentioned
Regulations as
their top of mind
risk for 2017 &
beyond
4
7. The Wealth Management Association (WMA) is a trade
association that aims is to ensure that business, regulatory, tax
and other relevant changes across UK and Europe are appropriate
and proportionate for the investment community and their clients.
Our members
WMA members comprise of 183 firms in the wealth management
community that look after over £734 billion of wealth for over 4
million retail investors, operate across more than 580 sites and employ
over 32,000 staff. Full members are firms such as wealth managers,
stockbrokers and private banks who deal in stocks, shares and other
financial instruments for individuals, trusts and charities through a range
of services spanning execution only, advisory and discretionary fund
management. Our associate members provide professional services to our
full member firms.
Our objectives and strategy
In line with our five strands of strategy, we aim to support the investment
community through:
The Wealth
Management
Association
WORKING FOR THE INVESTMENT
COMMUNITY & THEIR CLIENTS
Advocacy - speaking up for the members and
promoting the industry.
Influence - policy and regulation in the UK
and Europe.
Research, analysis, insight and information -
facts and figures on the industry, early warning
and interpretation of rules, providing guidance
to our members.
Thought leadership - leading the
debate and discussing trends that
affect the industry, our members and
their clients.
Facilitate, education and engagement-
sharing of good practice to enable
our members to apply that learning to
improving their own businesses.
8. 7
For enquiries please contact:
Ian Cornwall
Director of Regulation
ianc@thewma.co.uk
+44 (0) 20 7011 9865
Noelle Buckley
Head of Research
noelleb@thewma.co.uk
+44 (0) 20 7382 0370
Craig Esplin
Policy Adviser
craige@thewma.co.uk
+44 (0) 20 7011 9867
