The budget announcement of the new Lifetime ISA, poses some interesting challenges. The government bonus of 25% to help people is aimed at those under the age of 40 wanting to save for retirement or to buy their first home.
Beginning in April 2017, up to £4,000 can be saved each year until the age of 60, but it must be used as retirement income or withdrawn to help buy a first home.
The sting in the tail is a 5 per cent exit fee for people wanting to withdraw funds before the age of 60, so savers who exit early will not receive the government bonus.
Whilst many industry commentators are rounding on the impact to pensions saving, I thought the biggest internal issue could be;
“Have we got the right technology to support these new incentives?”
All of this is coming hard on the heels of MiFID II, now due in 2018, which providers should have already built into the project planning.
For many this will require new IT monitoring tools and that means people to maintain and monitor them
IT teaming up with Compliance now should be carrying out detailed risk analysis, mapping out the required processes and procedures required under MiFID II. Then, task by task, establish if existing solutions will be adequate, or need adjustment. Including, from time to time the domestic curve balls thrown at us by government, who are trying to invent ever more creative ways to get more people to save, with what seems to be increasing complexity.
For many this will require new IT monitoring tools and that means people to maintain and monitor them. The FCA has already said they will review the decision process as part of their regular audits of a firms compliance functions. Engaging early with systems vendors and putting appropriate service level agreements (SLAs) in place is an imperative.
Best execution, transaction reporting and trading workflows, client and product categorization, data reporting, call monitoring and transparency are to name but a few issues which should be factored in.
Everyone seems fixated on the rising cost of compliance, but are the budgets available and are they flexible enough to cater for the added technology costs? By costs I mean both technology and human resource.
MiFID II project manager roles covering IT are already advertised at six figures. This is on a par with Senior Compliance roles. The “new” incentives introduced by the governments for domestic savers seem only to add to the burden on the already expanding technology budgets within firms.
The article is entitled Investment IT, is it a job for life? I’ll leave it up to you consider whether or not it’s time to consider a career change. It strikes me that we will have to become more reliant on our friends in IT to help us cope with regulation, new products and services as the importance and more importantly the impact of their role continues to grow.
