The rise of fintech – and robo-advisors, in particular – is spurring financial services firms and financial advisors to embrace client-facing technology. But regulatory hurdles make it harder for them to implement these new tools into their practices. Now, one of the financial services industry’s self-regulatory organizations (SRO) is making it easier for them to do just that.
Those efforts began this past spring, when the Investment Industry Regulatory Organization of Canada (IIROC), which oversees investment dealers and their advisors, published a study it conducted with Accenture Consulting titled Enabling the Evolution of Advice in Canada. The report looked at the ways the wealth-management business is changing and how the SRO will need to “clarify how dealers may use technology to assist them in complying with existing rules” in order for registrants to “pursue innovative ideas.”
To that end, IIROC took the first step a week later and issued guidance to clarify and remind investment firms that they can offer their clients the convenience of electronic signatures (e-signatures) for contracts and consent forms. IIROC’s predecessor, the Investment Dealers’ Association, first allowed the use of e-signatures in 2002. But IIROC’s staff felt that the rules needed greater clarity. “Investment firms didn’t always understand clearly what our expectations were,” says Andrew Kriegler, IIROC’s president and chief executive.
In late August, IIROC followed that up by introducing new guidance that clarifies the use of automation for order execution-only investments firms (discount brokerages) in their client onboarding process. That same guidance states that IIROC intends to publish “updated guidance directed at all dealers concerning … the use of automation more broadly” in the future.
IIROC’s guidance on e-signatures arrived less than a week after a C.D Howe Institute report called on policy-makers to clear regulatory hurdles to make it easier for investment firms and advisors to adapt technology into their practices. That’s because they’re dealing with “a looming perfect storm – fee compression, shifting demographics, unrelenting regulatory changes and an erosion in the number of human advisors as advisors who are part of the baby boom [generation] look to their own retirement. In this context, technology should be viewed as a saviour, rather than a threat.”
Reggie Alvares, executive vice president at Investment Planning Counsel Inc. (IPC) in Mississauga, cites clearer regulatory guidance as a key factor in the dealer’s adoption of e-signatures this year.
Although IPC had already automated some customer onboarding processes, including know-your-client processes and the selection of investments, “we stopped short when the client signed,” he says. “We never got to that. And finally, this year, we’ve launched the e-signature solution.”
This summer, IPC introduced a pilot project to test out Docusign Inc.’s secure e-signature services among advisors on its IIROC-licensed platform. As a result, advisors will no longer have to print out forms and send them to the client to sign and mail back. The digital documents will also remove some manual back-end entry, Mr. Alvares says.
IPC will demonstrate the tool formally during its national conference in Quebec City later this month, followed by a general roll out to advisors at both its securities and mutual fund dealers, he notes. The ultimate goal is to also automate the entry of trading information from the onboarding documents, but there’s no timeline for that.
Another factor pushing IPC to streamline processes with technology is the need to refine client experiences in a rapidly changing industry.
“The whole introduction of the robo-advisor, even though it started several years ago, challenges all of us incumbents to think differently,” Mr. Alvares says.
As client expectations evolve, the use of e-signatures is only the beginning for advisors in terms of bringing technology into their practices. An Accenture report published in 2017 found that investors want the wealth-management industry to embrace a hybrid model in which the right technology tools are combined with the human touch.
“Investors are more confident about their own investment portfolios and investment actions,” Mr. Kriegler says. “They’re more digitally savvy and want to consume information the way they want to consume it.”
By embracing technology, advisors have the opportunity to deliver more value to their clients, says Kendra Thompson partner at Deloitte Canada and former managing director, capital markets, and wealth-management lead for North America at Accenture. By taking care of more routine mundane work, it prepares clients and investors to get the most out of their conversations.
It’s all about how advisors can “use technology to get through the things that are viewed as less valuable such as administrating accounts or doing reporting,” she says.
Technology will also help advisors to support a shift in their relationship with investors, adds Ms. Thompson. Deals with fintech services will be a big part of that.
Power Financial Corp., IPC’s parent company, owns a majority stake in robo-advisor Wealthsimple Inc. – and IPC has run pilot programs for advisors interested in using the service.
Other technology advances that advisors should expect to embrace include artificial intelligence-powered analytics that will provide more insight into client needs. Customer relationship management and client reporting technology will also feature heavily, along with technology that supports client transactions.
Advisors also will be able to expect that regulators such as IIROC will not only embrace technology, but modernize their approach to industry supervision in an effort to stay up to speed with evolving business models and processes in the investment business, the SRO states in its latest strategic plan, published in June.
“To complement our efforts in supporting industry transformation,” IIROC’s strategic plan states, “we will assess our current requirements and determine what changes need to be made, starting with where technology is appropriate for dealers to use in support of their supervisory activities.”