2017 is the year that many organisations will be preparing for MiFID II that is scheduled to become legal on 3rd January 2018.The legislation is one of the most radical changes to financial market regulation that the industry has ever seen; with the deadline rapidly approaching companies need to be get ‘compliance ready’, but should view it as an opportunity and not a hindrance.
The new regulation will overhaul Europe’s trading landscape with compliance costs predicted to be between €512 million – €732 million and ongoing costs of between €312 million – €586 million (HM treasury).The legislation will tighten the organisational requirements of investment firms and trading venues and will affect almost all firms dealing in or processing financial instruments, including those that were previously exempt across Europe.
The regulation aims to promote increased transparency, competitiveness and financial stability by introducing extensive changes to report around transactions beyond solely focusing on equities and changing the nature of reporting for those previously covered.
Companies should not see the forthcoming culture of compliance as a burden upon its business but should view it as an opportunity to propel the business into the future and embark on a digital transformation.
Getting Ready for Digital Transformation
The legislation requires companies to conduct stringent recording and store all telephone conversations and electronic communications to provide accurate evidence of what was said (or not said) during conversations between buyers, sellers and investment intermediaries. To achieve compliance companies will need to invest in a comprehensive call recording solution or upgrade their existing call recording solution to record and capture all transactions.
With the advancement of technology and the different methods used to communicate today, MiFID II has extended the remit of recording, forcing companies to capture all voice calls and data communications of all types on all devices and store them for a minimum of five years. Not only does it include desk and mobile phones, but social media to communicate with clients such as Facebook, WhatsApp or Linkedin. Companies will require a robust and reliant infrastructure to host the recording solution and to store the data. IT teams will also have to look at mobile device management strategy and prevent employees from ‘shadow IT’; stopping access to social networking communications and sites for client interactions.
In a market saturated with technology, deciding what recording solution you require can be quite a challenge. You need to decide whether you want an ‘out of the box’ solution that you can just plug and play, or whether you want to take this opportunity to invest in a solution that will grow with your business and help you to differentiate yourself in the market.
A solutions provider will take the time to understand your business by working closely with you, and not only strive to meet the compliance regulations but also to discover what your strategic objectives are and how technology can help you achieve them.
From the offset, we would advise a managed services cloud solution because the storage available on premise is often restricted and insufficient. A cloud solution will enable companies to accommodate the growing volume of data that MiFID II requires to be stored. A highly robust and resilient call recording solution is critical, one that will encrypt data in transit, organize it and store it in an impenetrable online vault so there is no room for downtime or margin for error.
It is imperative to work with a trusted solutions provider who has a heritage in call recording solutions and managed services and can deliver systems integration expertise combined with superior technical support. A high-quality solution combined with expert end-to-end services across the communications platform will ensure compliance for financial services companies.
The Start of the Race and not the End!
The objective naturally, is to be MiFID II compliant but it is crucial to recognize that this should not be the end goal. It is in fact the start of the race and not the end; the first step of a digital transformation journey that could improve business processes, services and customer satisfaction.
Data is Knowledge
The regulation is proposing that all data captured from recordings and transactions must be stored for a minimum of five years. This is a good opportunity to look at increasing your storage capability further to take advantage of the commercial gain from mining big data.
Harvesting customer interaction data is a priceless commodity for organisations. Such data is a valuable currency that can be used to understand more about your customers and analysed in depth for business intelligence. Newly gleaned insights will enable you to tailor existing services and offer new ones. As the data is collected across several different devices and spans across the omnichannel, this will provide a comprehensive view of all conversations. However, it is of course crucial to remember that the data is not valuable if it is just collected and analysed, it should also be acted upon to deliver the required outcomes.
A Paradigm Shift
The MiFID II regulation will evoke a paradigm shift to the financial industry with companies having to make significant changes to their IT infrastructure, business processes and data quality. Alongside the new levels of transparency and access to big data, companies will need to understand how to harness the power of their data to improve and offer new services. This in turn will create a new culture of knocking down the silos between departments where data must flow freely and people must work more openly and collaboratively. Companies that embark on a digital transformation strategy will need to move away from traditional ways of working in a hierarchical structure and learn to be more open and flexible to create a culture of collaboration where employees can work together without the limitations of the hierarchy and tradition. This is the way that millennials and the next generation work and businesses need to adhere to these changes to create a more transparent and open environment. Along with the MiFID II regulation, new technology and new ways of working, the industry will ultimately become more transparent than ever before, and that can only be a good thing for both businesses and clients.
Jonathan Sharp is Director of Britannic Technologies