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Top 5 Trends for the UK’s Regulated Businesses

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Top 5 Trends for the UK’s Regulated Businesses

Following on from our top 5 global trends article, the team at Broadgate have delved into the specifics affecting our core locations – the UK, Ireland, Switzerland, Luxembourg, Germany, and the US. Discover the prevailing trends affecting the UK’s regulated businesses below.

Sustainability Disclosure Requirements (SDR)

The Financial Conduct Authority has finalised its Sustainable Investment Rules, marking a fundamental shift in the way the UK’s regulated businesses will approach portfolio disclosure. The updates have arrived against the backdrop of exceptional growth in ESG funds.

The long-awaited SDR, designed to combat greenwashing and improve consumer market trust, will lay the groundwork for subsequent regulatory updates to widen its scope (it currently lacks coverage across key areas, including pensions and overseas funds).

The SDR will be phased in over the coming months, with significant dates including May 31st, 2024, for the implementation of the anti-greenwashing rule, and July 31st, 2024, for the introduction of the new labels for investment products. The key descriptors for the product labels given on the FCA’s policy statement are as follows:

  • Sustainability Focus –  ‘invests mainly in assets that focus on sustainability for people or the planet’

  • Sustainability Improvers – ‘invests mainly in assets that may not be sustainable now, with an aim to improve their sustainability for people or the planet over time’

  • Sustainability Impact – ‘Invests mainly in solutions to sustainability problems, with an aim to achieve a positive impact for people or the planet’

  • Sustainability Mixed Goals – ‘invests mainly in a mix of assets that either focus on sustainability, aim to improve their sustainability over time, or aim to achieve a positive impact for people or the planet.’

  • These product labels are intended to encourage transparency and improve consumer clarity throughout the investment decision-making process, mirroring the overarching objectives set out in the Consumer Duty Act (that partially came into force in July 2023).

FCA-regulated businesses will likely need to act fast if they hope to build resilient risk and compliance functions, a feat that, for some, represents costly infrastructural overhauls.

Here at Broadgate, we are currently experiencing fierce competition for Risk, Audit, and Compliance talent across all of our target locations as firms prepare for the changes. As B Corp accredited recruiters, we have a responsibility to help our clients balance sustainability and innovation at each touchstone of the hiring process. When you partner with Broadgate, you partner with a team that’s dedicated to using their platform as a force for positive change. If you need consultative support or talent market insights from our specialist recruiters, contact the team here:

The Consumer Duty Act

Hailed by many as one of the most significant regulatory updates in decades, the Consumer Duty Act has been in force for nearly six months (as of July 31st, 2023). The FCA recently warned firms that the CDA was not a ‘one and done exercise,’ reaffirming their position of considering Consumer Duty a ‘top priority.’ Whilst the CDA is in force for open products, the deadline for firms offering closed products is July 31st, 2024.

Despite seeing many positive effects stemming from the implementation of the CDA – including increased investment in staff training, customer outreach, and improved communication – we have seen firms struggle with conducting accurate reporting, particularly when it comes to identifying and classifying vulnerable customers.

We expect this to improve given a maturing landscape and the renewed focus on operational resilience, catalysed by the FCA’s intention to become ‘more targeted, intrusive, and assertive’ in their supervisory approach.

The upcoming deadline for CDA implementation on closed products falls at a time of shrinking budgets and rising competition for talent, which, for many, represents a slew of unique challenges such as:

  • In-Scope Determination – We might see some firms struggle to identify which closed products fall under the remit of the CDA, given that the initial product would have been purchased under a separate set of regulations. Firms will need to revisit the original commitment to determine if the product is a risk to the customer in its current state, which could be an incredibly complex process.

  • Data handling – Whilst the majority of firms have comprehensive data banks to refer to, collating and analysing the raw data is proving to be a major barrier to progress for some. Data-savvy compliance talent and up-to-date tech systems will be instrumental in helping businesses demonstrate their progress to the FCA.

  • Knowledge Gaps – Firms will need to proactively upskill large portions of their workforce to ensure that they remain compliant with the regulations at each cornerstone of the business.

Broadgate is currently partnered with a range of businesses targeting SMCR-savvy talent (with CDA knowledge) in both a back and front-office capacity – contact our specialists for targeted insights on the shape of the current talent market in this space.

Tech Enablement

AI is transforming the working world at what appears to be every possible touchpoint. 2023 was the year of AI breakthroughs, and we expect 2024 to be no different as it builds on the momentum of a landmark year.

A strong regulatory framework is a necessity for protecting both businesses and consumers against the most harmful outcomes of AI adoption – discriminatory categorisation, job displacement, a lack of transparency, fraud, etc – but many detractors claim regulatory red tape will stifle innovation.

The EU’s AI act is a prime example. Labelled as ‘the world’s first comprehensive AI law’ the act has been met with some backlash, which is likely the reason for the recent amendment to the innovation pitch.

The UK government outlined its plans for a ‘pro-innovation approach’ to AI regulation back in March 2023 in a proposal that resembles the US method of favouring less centralisation. Since then, the UK government have said it will refrain from regulating AI in the short term.

As a global leader in the AI market (behind the US, China, and Canada), the UK makes a strong contribution to AI research and Development, particularly in the fields of Natural Language Processing (NLP) and Computer Vision.

In a recent consultation paper by FCA, the PRA, and the Bank of England, respondents concluded that a regulatory definition of AI would not be useful.

We anticipate a sharp rise in PropTech, RegTech, and NLP across the financial services space in the coming months. The rise of FinTech challenger banks will likely drive this even further, as consumer expectations shift towards hyper-personalised financial experiences.

Financial Crime, Fraud, and Technology

Once seen as a cost centre, cybersecurity functions have found themselves in the limelight under the looming threat of increasingly sophisticated cyber threats. The finance sector is the most targeted sector by cyber criminals, and as a result, demand for security-minded candidates is rising across the entire landscape.

Whether that’s in Risk Management or Fund Administration, a tech-enabled finance sector requires tech-enabled candidates to thrive.

We regularly partner with our sister brand – digital tech recruitment specialists Trust in SODA – to create access to a wider, tech-oriented talent pool, converging our specialisms to pinpoint fraud and financial crime candidates with the contemporary tech skills needed to perform niche roles.

If you’re searching for your next hire, Broadgate’s specialist recruiters are equipped to help you identify, attract, and retain top talent across the full spectrum of financial services. Reach out to me directly to find out more about our community-led approach to recruitment.

The Broadgate team are your full-service recruitment partners, providing community-led interim and permanent talent solutions to regulated businesses across the UK, Ireland, Switzerland, Germany, Luxembourg, and the US. Our specialist consultants focus on mid to senior and board-level appointments across Finance, Accounting and Audit, Risk, Compliance, Fund and Operations, Financial Crime and Fraud, and Legal and CoSec.