Total estimated compliance costs for private
banks in the UK equated to 47% of the sector’s profits in 2010,
according to new data from benchmarking and research provider
ComPeer.
The data was generated after ComPeer surveyed
50 of the top firms in the UK wealth management industry and polled
300 high net worth individuals.
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It highlights the burden facing private banks
in the UK. For example, meeting various regulatory requirements
from the UK, the European Union (EU) and the US cost the UK wealth
management industry 9% of its income in 2011, according to
projected figures from ComPeer.
The provider estimates that the hidden cost of
compliance, which involves time spent on compliance matters by
senior management, front office professionals and other
non-compliance staff, is at least equal to the direct recorded cost
of compliance.
“There’s a cost-benefit analysis that needs to
be done and is not being done,” ComPeer non-executive director
Bruce Weatherill told Private Banker International.
The total estimated compliance costs for the
UK wealth management industry was £416m ($663m) in 2011.
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By GlobalDataIn 2010 alone, expenditure on the FSA’s Retail
Distribution Review increased by 50%.
Angela Knight, CEO of the British Banking
Association, has warned that if wealth managers think compliance
costs are high now they are in for a rude awakening in the
future.
For example, compliance costs are set to rise
for the US’ FATCA legislation and the EU’s MiFID directive.
Of 300 HNW clients polled for ComPeer’s survey
on compliance, 69% expect additional compliance costs will be
passed on to them.
They were evenly split on whether compliance
changes have made them more secure, with 41% feeling more secure
and 43% less secure.
Andrew Tyrie, MP, and chairman of the UK’s
Treasury Select Committee, said as the ComPeer survey develops, the
UK’s Financial Services Authority, trade bodies and the government
would have to take the results into account.
The FSA declined to comment on ComPeer’s
data.
