Asset Management is Changing – Can Compliance Leaders Keep Their Seat at the Table?
Original article posted on Tabb Forum.
With ongoing policy changes from the current administration and major macroeconomic developments dominating the headlines, it’s clear that these shifts are driving significant changes in both investment strategies and trading approaches. However, there are three other key trends that asset managers need to navigate, which are being overshadowed by the current headlines.
Let’s explore these three major trends and what compliance leaders need to do to effectively partner the business.
- The Rise of Crypto – Digital assets are booming. Institutional interest in cryptocurrencies is surging, and all signs point to significant growth in this asset class. Compliance leaders need to stay ahead of regulatory developments and ensure practical frameworks to manage the associated risks.
- Integration of Services and Blending Public & Private Assets – Asset management firms are offering more holistic solutions by integrating financial product creation, distribution, advisory, asset servicing, and risk intermediation. A key example of this trend is the blending of public and private assets to achieve better risk-adjusted yields, improved liquidity, and attractive fee levels. Compliance leaders must understand the implications of these integrated services and ensure practical risk management practices.
- Technological Advancements – Firms are leveraging technology to enhance transparency, security, and client experiences. The adoption of digital tools for better risk management and operational resilience is crucial. Compliance teams need to be well-versed in these technologies to oversee their implementation effectively.
The Compliance Challenge
These developments present unique challenges for compliance. The combination of these factors is leading to a major shift in how compliance leaders need to team up with the business. The pace of business is ever-increasing, and now is the time to act. Waiting risks being overwhelmed by business models that aren’t properly risk-adjusted, potentially forcing Compliance back into a “rule enforcer” role and – worse – being seen as a blocker by the business.
Taking Action: 3 Steps for Compliance Leaders
To keep pace and effectively partner with the business, compliance leaders can take these steps:
- Understand General Trends – Stay informed about the latest trends and developments in the asset management industry. This knowledge will help you anticipate changes and proactively address compliance challenges.
- Know the Business Vision – Understand the business’s vision regarding innovation and strategy. Aligning Compliance efforts with the business’s goals will help create a collaborative environment.
- Transform Your Organization
- People: Ensure your team has the right mindset and skillsets, including technology, data skills, communication, collaboration, curiosity, creativity, and flexibility.
- Integration: Go on fostering close relationships with the Business to ensure Compliance is seen as a partner rather than a barrier. Be sure your insights are based on good data and presented with sharp visual aids.
- Continuous Improvement: Regularly assess and evolve your Compliance Program and your tech stack to keep up with the dynamic business environment.
While we don’t have control over the current “whipsaw” macro environment, it does create a test for us, not just the Business. Compliance must keep pace with the Business in times like this because it is this type of crucible that separates the winners from losers. And this is one test Compliance leaders can’t fail. If we do, we risk losing decades of progress toward building meaningful relationships and watching our hard-earned respect slip away.
We also risk letting the Business “paint itself into a corner” by adopting practices that aren’t well thought out or risk adjusted. If this happens, Compliance will once again be playing from behind and ultimately lowered back to the adversarial “blocker” role.
We’ve earned our seat at the table. It’s time to make sure we don’t lose it.
Riding the Regulatory Wave
