The average advice firm is now spending 13 hours a week on compliance, a new study has revealed.
Model Office’s latest advice industry benchmark report highlighted the rising cost of compliance-related activity and the burden it is placing on firms.
Overall, half of advice firms said they are still concerned they are not gaining enough rigorous outsourced compliance support with the Consumer Duty in mind, with one in three similarly concerned regarding internal compliance support.
It also showed that between 7-18 hours a week is being spent on governance, risk and compliance activity.
Model Office analysed data from its RegTech software where over 800 retail intermediary advice (RIA) firms use MO’s RegTech benchmarking, and AI heat-mapped dashboards.
The software data, coupled with the research responses, revealed some fascinating trends across the challenges of rising costs within the industry and general economic conditions.
The biggest challenges over the next 12 months are the Consumer Duty and validation of services and products supporting good outcomes, gaining the right people with right skills, lack of budget and resources, the volume and implementation of regulatory change
New on the list is artificial intelligence (AI), viewed as both an opportunity and a risk by compliance officers.
The direct and indirect average cost has increased to 20% of annual revenue dependent on firm size – up again from last year.
The average firm is spending 13 hours a week on compliance activities – over two months a year or 27% of their time.
One in two are concerned their compliance data is not easily available and quality levels are poor, and only 33% are confident they can gain instant access quality compliance data for an audit
The compliance manager survival guide
And half are concerned they are not gaining rigorous compliance support from third parties.
Model Office claims that those who already use RegTech are saving over 25% and 30% of compliance costs and time associated with compliance activity such as audits which increases to 50% when generative AI is applied.
The report explores the most important issues, recognises where improvements have been made, highlights areas that will need to be addressed, and provides some practical suggestions for managing governance, risk and compliance costs and challenges.
Chris Davies, founder and director at Model Office, said: “It is great to see advice firms testing and trialling RegTech and AI tools, particularly given the survey results show they are now spending over 60% of time on business and compliance activities rather than client meetings, compliance costs are up from last year, plus one in two unsure on data quality and access, all means they are up against it when it comes to ensuring evidencing compliance and sustainable business practice.”
