As the financial crisis has evolved, so have calls by regulators, market participants and the media to revise the scope and action of financial services. The liquidity trap has led institutions to believe that ever-increasing client demand for yield and investment opportunities could be matched by financial innovation in the form of new products or payoffs.
However, as markets went into free fall and investors struggled to reach safe havens, many banks’ reputations suffered irreparable damage. The complacency with which market participants managed the flow of information between wealth managers and final investors directly impacted the smooth functioning of financial markets. New or revised market regulations such as the Markets in Financial Instruments Directive, Dodd-Frank, Retail Distribution Review and Undertakings for Collective Investment in Transferable Securities are now imposing greater demands on wealth managers using risk-based criteria which clearly delineate how they need to operate.