Merging Trading and Wealth Management: Using RACI to Ensure Regulatory, Risk, and Operational Alignment

When an investment bank merges its trading division with a wealth management unit, the integration of regulatory frameworks, trade reporting, risk management, and operational support becomes a highly complex process. The RACI (Responsible, Accountable, Consulted, Informed) framework provides a structured approach to defining roles, ensuring accountability, and mitigating risks during the transition.

1. Regulatory Compliance & Trade Reporting

One of the most significant challenges is aligning regulatory requirements, as trading operates under MiFID II, Dodd-Frank, Basel III, and SEC rules, while wealth management follows fiduciary and suitability standards like FINRA and ESG investment mandates. Compliance teams from both units are Responsible for mapping and reconciling regulatory obligations. The Chief Compliance Officer (CCO) is Accountable for ensuring the new entity meets regulatory expectations, including trade transparency, best execution, and suitability rules. Legal teams and external regulatory consultants are Consulted, while executives, traders, and relationship managers are Informed about changes in compliance policies. Trade reporting must also be integrated across platforms to ensure that Wealth Management (WM) client transactions adhere to the same best execution standards as trading desks.

2. Trade Attestation & Surveillance

Ensuring that trading activity aligns with client portfolios and regulatory mandates requires an enhanced trade attestation framework. The Market Surveillance Team is Responsible for monitoring trade execution consistency and flagging potential conflicts of interest. The Head of Trading Risk & Controls is Accountable for ensuring post-trade attestations meet SEC and MiFID II standards. Front-office traders, investment advisors, and external auditors are Consulted, while risk teams and compliance officers are Informed about escalations. This structured approach ensures accurate trade allocation, pre-trade compliance checks, and post-trade reconciliation between both businesses.

3. Risk Management & Portfolio Oversight

Merging a high-frequency trading environment with a long-term advisory business requires a harmonized risk management framework. The Risk & Control Teams are Responsible for integrating VaR (Value at Risk) models from trading with client-focused risk metrics in wealth management, such as concentration limits, stress testing, and liquidity risk. The Chief Risk Officer (CRO) is Accountable for ensuring alignment with Basel III capital requirements and stress-testing methodologies. Portfolio managers, quantitative risk analysts, and compliance officers are Consulted, while board members and regulators are Informed about how new risk parameters impact capital allocation and trading exposure.

4. Operational & Middle Office Integration

Trade execution and settlement processes need to be seamlessly integrated to prevent operational bottlenecks. Operations & Middle Office Teams are Responsible for aligning order management systems (OMS), execution platforms, trade reconciliation tools, and settlement protocols. The Head of Operations is Accountable for ensuring a consistent T+1/T+2 settlement cycle across both businesses, minimizing trade breaks. Technology teams, clearing firms, and prime brokers are Consulted, while portfolio managers and traders are Informed about changes in execution flows.

5. Post-Merger Audit & Controls

Ensuring post-merger controls remain robust is essential to prevent regulatory breaches. The Internal Audit & Risk Review Teams are Responsible for conducting periodic audits to assess regulatory adherence and operational consistency. The Chief Internal Auditor is Accountable for delivering findings to the board and regulatory bodies. Legal, compliance, and external auditors are Consulted, while investors and stakeholders are Informed about ongoing controls and risk mitigation efforts.

Final Thoughts

By using RACI to structure regulatory, trade reporting, risk management, and operational support, investment banks can achieve a smooth integration while ensuring compliance with global standards. This framework eliminates ambiguity, enhances oversight, and optimizes trade execution across both trading and wealth management platforms, ensuring that the new entity operates efficiently, transparently, and with full regulatory adherence.