Ready for the early majority: the adoption and advancement of automated eligibility processes is a winning proposition in 2022

The manual cross-border and product suitability assessments with hard-copy manuals and check-lists were error-prone and time-consuming. Automated solutions are in demand. A closer look to an often overlooked FinTech stream.

From niche to mainstream

Reliable information on investment restrictions, especially in the context of cross-border banking, has become a crucial factor to comply with mounting regulatory requirements. The number of regulatory enforcement actions is increasing and affected financial service providers are bearing reputational and financial risks. No wonder that a growing number of banks, wealth and asset managers as well as independent financial advisors are recognising the need for automated processes to determine suitability and adopting innovative but well-established solutions. In the last five years, cross-border product and service suitability were the main concerns for financial institutions and the drivers for this development. However, market demand is signalling that the suitability landscape is evolving in terms of topics but also in the way supporting technology is integrated.

The next wave of regulations

In many countries, the public demand for change has led to initiatives and reform plans for greener and more sustainable societies. At the forefront is the European Union, with a flagship sustainable transformational agenda for its single market economy. Which, after several years in the making, is now entering the critical introduction phase with a wave of regulations. The EU Action Plan on Sustainable Finance will enforce tangible systemic changes to the EU financial eco-system. It aims to ensure that the financial sector is part of the transformation of the EU economy to deliver on climate, environmental and social sustainability goals.

While many financial institutions have been observing the developments, the time has come to take the next steps to stay compliant. Banks and wealth managers alike need to comply with a myriad of new regulations like Sustainable Finance Disclosure Regulation (SFDR) or the ESG-driven MiFID amendment which requires to evaluate a clients’ preference for ESG investments. Subsequently, these client preferences must be considered in a products suitability assessment during the advisory process.

In Switzerland, the Federal Council has given banks time until end of this year to implement comparable and meaningful climate compatibility indicators to all financial products and client portfolios. In this push for transparency, the Federal Council mentions temperature pathways as a possibility.

Investment Navigator has therefore created the opportunity for their clients to apply and integrate sustainable finance filters and data into their customised suitability solutions. As the operational integration of ESG criteria is only the last mile on the route to be compliant, Investment Navigator joined forces with ECOFACT. The complimentary expertise of the two companies gives clients the full breadth and depth to master regulatory requirements governing sustainable finance and corporate responsibility.


“Providing pragmatic solutions to an evolving product distribution landscape is the raison d’etre of our company”

Over the last 8 years, Investment Navigator has built a global client base by providing automated suitability assessments, investment distribution restriction data and product information platforms. We talked to Investment Navigator CEO and co-founder Alberto Rama to discuss collaborations, ESG and market trends.

What sets Investment Navigator apart from competitors?

Unlike many other suitability service providers, Investment Navigator is truly independent. Our clients are not locked in and limited to the input of a specific rule-set or data provider, but we are rather giving them the freedom and flexibility that is needed to succeed over the long run in a rapidly changing world.

Further, the whole client facing team at Investment Navigator consists of true product distribution experts, everyone having multi-year experience in investment distribution at market leading financial institutions. This track record helps not only to provide a tech solution to our clients, but also to consult and act as a true sparring partner to find and create together the right solutions. Sometimes this means to connect and involve specialists outside of our company.

Has collaboration been a driver of growth?

We don’t collaborate just for the sake of growth. In the first place, a collaboration should bring our clients either more options to choose from or improve our solution. Over the years, we were able to establish a strong best-in-class technology and content network, always with the aim to drive innovation and service excellence. A great example is the collaboration with Clearstream Fund Centre. The integration of our automated suitability assessments into an existing platform supports fund distributors in their efforts to establish a seamless, efficient, and compliant investment process, for pre- and post-trade checks.

Recently, you also started to offer the integration of sustainable finance filters and data into your platforms and suitability assessments. Why did you do this now?

Driven by regulatory changes around the world, Sustainable Finance has become critical for our clients. Providing pragmatic solutions to an evolving product distribution landscape is the raison d’etre of our company. But beyond our company mission, we are aware that everything from economic prosperity to public health is connected and ultimately comes down to our performance on environmental, social and governance issues.

What is your stance on ESG?

What is very important to me, is the message that ESG does not mean green investing. It is a framework of performance and risk management applicable to all kind of investments. Conscious investing with the transparency about the environmental and social performance allows investors to recognise the impact of their assets and to be held accountable for their investment decisions.

Besides this next wave of regulations regarding ESG, what other trends do you see in the market?

We see a growing interest in tax-related checks. Not long ago, many financial institutions were shying away to get their hands on tax questions but this is changing. I assume that this has most likely to do with the rising expectations of investors towards advisory services and as a point of differentiation to self-service investment platforms. I am also excited to see growing demand in eligibility checks for other instrument types than funds.

Written by Investment Navigator. Published on 14 January 2021.



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