In the financial services industry, the expanding and increasingly complex regulatory environment is raising the stakes for compliance. Yet even as the demands placed on firms to comply with regulation seem more burdensome, a competitive business environment and challenging revenue picture have made firms increasingly cost-conscious. For smaller multifamily offices and investment management firms, the breadth and complexity of regulation in Canada and the rising costs of compliance present a particular challenge.
“Small firms often have limited resources for compliance, but the needs are growing,” says Frédéric Béland, Chief Compliance Officer at PBY Capital Limited, a Toronto-based exempt market dealer and investment fund manager. “Today, compliance staff need to cover not only securities regulation, but also anti-money laundering, anti-tax evasion laws, and now privacy and cybersecurity issues. It’s a lot to remember, and it’s easy to miss things.”
To address those challenges, more and more firms turn to technological solutions. So-called RegTech—IT platforms that promise to make regulatory and compliance processes more efficient and robust—is experiencing extraordinary growth: a recent study by MarketsandMarkets projects better than 20% CAGR in the segment globally through 2026.
It’s not hard to see why, given the risks and costs of noncompliance and the pressure on resources. “The right solution can really make life easier and fundamentally improve how you do compliance,” says Jessica Gendron, a compliance lawyer and Chief Operating Officer at AlphaCCO, a Montreal-based RegTech company. “It can be a game-changer in terms of increasing productivity, managing workflows, automating basic tasks, and providing a centralized channel for documentation and communication.”
Gendron says that a first step is for firms to be realistic about what a compliance solution can and can’t do. Because most firms consider compliance as merely a cost centre, they sometimes focus solely on potential savings. “Sometimes, they literally say their goal is to relieve themselves almost entirely of the compliance burden,” Gendron adds. “As of 2024, that’s a little bit utopian.”
What a good tech solution can do, she says, is reduce the burden of compliance so that staff can “allocate time and resources to what’s really critical to the firm.” In that light, RegTech becomes a way not just to play better defence, but also to positively contribute to organizational goals. “To me, there is a massive opportunity for firms to exploit a competitive advantage in compliance and distinguish themselves from their peers,” Gendron explains. “We often talk about reputational risk, but I think we underestimate the positive impact that compliance can have on client perception, since it is basically investors that regulations are designed to protect.”
Seizing that “massive opportunity” requires adopting the right solution, of course, but that can be more complicated than it might seem.
For instance, it’s often tempting for firms to choose big U.S. providers, Béland says—“your board will always recognize the name.” But more importantly, he adds, a firm needs to find a technology partner who truly understands a Canadian business and is a good fit for the firm’s size. Large platforms can tend to be rigid, making them difficult and expensive to implement and customize for a firm’s particular needs, especially as it grows. As well, when a small Canadian family office or investment firm requires support, “it might end up not being a top priority to a large U.S. vendor,” Béland says, “and its needs as a Canadian registrant will be seen as too complicated or too difficult to really address.”
Gendron, who has more than a decade of experience in financial services compliance, echoes Béland in recommending a niche, Canadian solution that accommodates proactive improvement and an understanding of a smaller firm’s unique compliance needs and resources. She says firms should look for three qualities in a RegTech solution:
- It should be intuitive, which eases the change management a new implementation always requires, and promotes adoption and use across the firm.
- It should be configurable, meaning that it is scalable as the business grows and that the firm’s own team can adapt the solution, rather than relying on expensive and time-consuming development by the vendor.
- It should have an open architecture, with the capability to centralize data and connect to other applications. “Faster than they realize, firms can end up with a massive and complex technology stack, and connecting another one on top of that can become a real challenge from a financial, employee experience and even compliance point of view,” Gendron says.
AlphaCCO’s compliance platform aims to tick all of those boxes, bringing structure, accountability and real-time insights into a compliance program at an affordable price for smaller firms, Gendron says. Its leading-edge workflow design technology automates tasks in less time and with fewer errors than human compliance staff could. The platform also centralizes the firm’s compliance program into one application, while simultaneously documenting and executing tasks. And all the data entered into AlphaCCO can be retrieved immediately, at any point in time.
That helps make compliance processes more actionable, more robust and—importantly, in a world where regulatory audits are a continual risk—more easily traceable. “The feedback our client firms get from regulators is positive,” Gendron says, “and our clients’ feedback is consistently that AlphaCCO gives them back more time.”
From a compliance officer’s perspective, Béland says one of AlphaCCO’s key benefits is that it allows the firm to be always audit-ready. In today’s regulatory landscape, it is not enough for a firm to be committed to compliant policies and procedures; it must be able to demonstrate that it has effectively implemented those policies and procedures—something that is difficult to do when documenting compliance programs on a simple, check-the-box-style spreadsheet.
More generally, Béland says, the platform has made the work of compliance easier, more efficient and more accurate across the company, so much so that it has become an intrinsic part of PBY Capital’s operations. “As a firm, we don’t drop any balls, and if I were to leave the company, whoever the next chief compliance officer is would have a great view of what our compliance framework actually means in practice,” he explains. “Good RegTech like AlphaCCO is more than a task list or a database—it’s an organizational-level solution.”
This story was created by Canadian Family Offices’ commercial content division on behalf of PBY Capital Limited, which is a member and content provider of this publication.
PBY Capital Limited is registered as an exempt market dealer and an investment fund manager with Canadian provincial securities regulatory authorities, servicing family offices and their professionals. For more information, visit: www.pbycapital.com.