RegTech Insights

Data privacy is a significant concern for investors.

July 21, 2023
min read

Sid Yenamandra

Sid Yenamandra is the Founder and CEO of Surge Ventures, an esteemed entrepreneur and executive with a remarkable track record in the cybersecurity and technology sectors. With successful exits from three startups, Sid has left a lasting impact on the industry. Notably, he founded and led Entreda, a top provider of cybersecurity compliance software for financial services firms, which was acquired by K1 Capital and RegTech Unicorn Smarsh. Sid's leadership also included the acquisition of Privva, a leading provider of third-party vendor risk management software. His expertise in driving growth and innovation is further exemplified by his key roles at Plato Networks and PacketFX, both of which were acquired by prominent companies in the tech industry. With dual B.S. degrees in Electrical Engineering and Computer Science from UC Berkeley and a wealth of experience, Sid is widely recognized for his authoritative knowledge and ability to develop groundbreaking solutions in the cybersecurity landscape.

Attention financial advisors: The venture studios’ community is watching. As some venture studios rethink their approach to data privacy, they are looking for new ways to partner with companies that can help them stay ahead of regulatory changes. This is good news for you—your firm can look toward a future where data privacy will be a key differentiator in the wealth management industry.

Data privacy is a significant concern for investors, and it's easy to see why. While many factors determine the success of an investment firm, one common element shared by all successful firms is their ability to generate high returns on investment. This means that data privacy is not just a concern from a regulatory perspective; it also represents a direct threat to investors' business goals.

As such, firms must demonstrate how they can protect investor data at every stage of the customer journey to maintain strong relationships with clients and remain competitive in the industry.

Data privacy impacts investors.

Data privacy is a significant issue for investors. The EU has recently expanded its data protection laws to include asset managers, forcing them to make changes that can be costly and time-consuming.

For example, many wealth management firms have been adopting new technologies like artificial intelligence (AI) or robo-advisors to streamline the investment process and improve client experience. However, these technologies often generate large amounts of customer data that have to be stored securely if they are going to be successful.

Investors also care about data privacy because it impacts their decisions around investments: if they have concerns about how financial services providers might misuse their personal information, they may choose not to invest at all or invest elsewhere instead—this is known as "opting out."

Data privacy issues can create barriers for new entrants into the wealth management industry and existing players trying to expand their customer base.

Why wealth management firms need to make data privacy a priority

While a few wealth management firms have been proactive about adopting data privacy policies and compliance, many still need help to stay abreast of the regulatory compliance requirements. They need to take a proactive approach to prepare for the increase in data privacy laws and regulations and changing client expectations.

The wealth management industry must adopt data privacy compliance as a top priority. This is not only due to its implications on personal consumer protection and regulatory risk but also to ensure its ongoing relevance in the digital economy.

The right venture studios’ are aware of data privacy risks for their companies.

Some venture studios are aware of their companies' data privacy risks and are in a position to influence change within their portfolio:

  • The data privacy landscape is changing rapidly. Data privacy is a significant concern for investors, who will support companies that adopt a "privacy by design" approach over those that do not, regardless of the business model or type of investor involved.
  • The right venture studio can play an essential role as key stakeholders in helping shape how wealth management firms address data privacy compliance issues within their organizations and as they seek out new ways to improve engagement with clients through technology innovation.

Firms must advance their data privacy strategies to stay one step ahead of regulations.

The global data privacy issue is important for investors, companies, and regulators alike. For example, in the US, the Securities and Exchange Commission (SEC) continues to work on regulating how investment managers treat their clients' data.

The SEC also recently issued a report on cybersecurity risks facing US-listed companies. The report highlights the importance of being prepared for potential cyber-attacks and outlines steps companies should take to protect themselves from such attacks.

In addition to these regulatory developments, some venture studios’ firms like Surge Ventures are increasingly focusing on data protection to identify new opportunities in an increasingly connected world.

Companies should adopt a "privacy by design" approach.

Privacy by design is a development approach that embeds data protection into systems design rather than as an afterthought. It allows companies to build privacy into their products and services from the outset.

Companies should adopt a "privacy by design" approach when developing new technologies and processes to minimize the risk of security breaches and ensure that personal information collected is used for legitimate business purposes only.

Venture studios can help companies implement robust data privacy strategies and practices.

A venture studio specializing in data privacy can help companies implement robust data privacy strategies and practices. A partner who understands the complexities of data privacy holds excellent value for wealth management firms, especially as they navigate compliance with new regulations.

Venture studios can provide startups with access to legal counsel, security experts, and other service providers that can help companies build a robust data-privacy strategy.

To successfully position your firm for the future, you must have a strong data privacy strategy.

To successfully position your firm for the future, you must have a strong data privacy strategy.

Data privacy is increasingly becoming a significant concern for investors and regulators alike.

The European Union implemented the General Data Protection Regulation (GDPR), which requires companies to implement stricter security measures and greater transparency around handling customer information.

Partner with the right venture studio that is aware of these risks can help you proactively address them by implementing data privacy strategies beyond compliance.

To stay one step ahead on this front, firms need to advance their data privacy strategies in line with best practices outlined by industry groups such as FINRA or CFPB guidance published last year—and ensure they're following through on those initiatives internally as well.

Final thought

If you're looking to position your firm for the future, privacy should be a top priority. While it may seem abstract today, regulation will undoubtedly increase in the coming years.

By taking steps now to adopt strong data privacy practices and implement robust data security measures, you can ensure that your wealth management business stays ahead of regulations and protects against potential breaches.

Are you an asset manager looking for a way to keep up with the latest data privacy regulations?

Surge Ventures can help. We offer a variety of services to help your firm adopt data privacy rules that meet compliance, while also helping you maximize the return on your data by keeping it secure and accessible.

With our help, you can:

  • Understand what is required by law.
  • Keep your clients' data safe and secure.
  • Stay compliant with all relevant laws.

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