The last couple of weeks were very challenging and turbulent for all industries and segments across all continents of the globe, due to the ongoing spread of COVID-19, and financial services are no exception. Financial services are not only experiencing the challenges of COVID-19 but also the encounters of highly volatile markets. Nevertheless, the current COVID-19 situation has left businesses to rethink their ways of operating and whether alternative methods might lead to the same service given to clients. Such situations have also been on the top of the agenda for senior management and compliance professionals within financial services sector.

The major challenge for compliance professionals in the past weeks was that of ensuring that the ‘new normal’ is an equilibrium between the business needs of their company and the service that the company provides to its customers. The pendulum between the business needs and clients are the various regulations that regulate the financial services industry. It is essential that companies ensure that all processes adopted remain in line with the obligations vis-à-vis the regulations. Striking this balance in times of a pandemic can be quite challenging too! In view of this, compliance teams had to ensure that staff members were fully equipped with the necessary systems that allow them to provide a service to their clients with minimal disruption during these difficult times.

Embracing the challenges

It is no news that one of the key challenges for financial institutions is the level of regulatory requirements. Sometimes, in order to comply with regulatory requirements, financial institutions need to look at data through different regulatory lenses. Therefore, it is no surprise that in times like these, all regulatory obligations imposed on companies, which vary from MiFID II requirements to Anti-Money Laundering (AML) requirements must still be fully adhered to.

One of the major challenges faced in the last couple of weeks was achieving the right balance between regulatory obligations, more specifically AML obligations on the company and customer due diligence (CDD) requirements. CDD is the process through which companies obtain information and documentation about their clients for the former to be able to assess the risks that the client may impose on the company.

Due to social distancing measures recommended by Health authorities, service providers had to tweak their operational processes and move towards digital methods and non-face-to-face communication with their clients. The clients, being on the other side of the coin, had to adapt to this change too. Despite the fact that non-face-to-face communication was an option already available pre COVID-19, the difference between pre COVID-19 and nowadays is that now non-face-to-face interactions are mandatory. Like always, some people would be more than happy to adopt to a digital transformation while others might be less willing to adapt.

One must note that the majority of the financial services firms in Malta have embraced the challenges brought by COVID-19 quite rapidly. However, it is useless for companies to adopt this change if clients are not embracing the changes too. Clients must always keep in mind that requests by their investment advisors during non-face-to-face communication which are sometimes higher when compared to face-to-face meetings are not only serving as a safeguard for financial services firms but also for the clients themselves. This applies both for communication over the phone as well as when holding virtual meetings. In view of this, clients are deeply encouraged to embrace the challenges faced during the current situation and do not fear the change. One may also realise that digital change has also its positive aspects.

Discussing financial needs over the phone with an investment advisor rather than during a physical meeting will lead to the same result. The only difference would be that your investment advisor would be unable to offer you a coffee! Furthermore, during times like these, clients may also realise that electronic systems of communication such as receiving communication by email rather than traditional post will not only benefit to achieve a greener environment but will also give them instant access to communication without the need to wait for the physical delivery of  mail. This method of communication will also provide clients with easy future reference to communication received from the investment advisors.

While local Health Authorities have indicated that some restrictive measures might be lifted in the coming days, the ‘new normal’ might still last for weeks or even months and social distancing will remain of utmost importance. Therefore, the current adjustments to the operational practices within the financial services firms might last for months too and in view of this all parties involved in the chain should ensure that this change is healthily managed. Nevertheless, as we always advise, investors should always consult their investment advisor in order to receive the best possible guidance.

One should keep in mind that adopting to a new way of interaction between clients and financial services professionals in a situation where physical interaction is not available might help people realise that after all, change is good.

 

Maria Saliba, AICA, B Com (Hons) (Banking and Finance) is Head of Compliance at Jesmond Mizzi Financial Advisors Limited. This article does not intend to give investment advice and the contents therein should not be construed as such. The Company is licensed to conduct investment services by the MFSA and is a Member of the Malta Stock Exchange and a member of the Atlas Group. The directors or related parties, including the company, and their clients are likely to have an interest in securities mentioned in this article. Investors should remember that past performance is no guide to future performance and that the value of investments may go down as well as up. For further information contact Jesmond Mizzi Financial Advisors Limited of 67, Level 3, South Street, Valletta, on Tel: 2122 4410, or email [email protected]