Interview with Brian Fahey, CEO of MyComplianceOffice, Ireland

Interview with Brian Fahey, CEO of MyComplianceOffice, Ireland


BF: The global regtech sector is on the rise and expected to leap up in worth by almost $10 billion to $44.5 billion by 2027. Ireland has done well to advance the local regtech sector, with 68 indigenous startups on the market at the end of 2021. Can you tell us the reasons Ireland is a positive space to set up a regtech entity in terms of policies, funding, available talent and location?

Brian Fahey: For regtech, it’s a combination of understanding its industry and putting technology to deliver for functionality and software solutions to help clients accommodate and meet the needs of those regulations in the marketplace. You end up having most technology firms and very smart technologists, but understanding your space, and being able to talk to people to understand that, is very important. I have been in the US for many years, delivering software technology for financial services firms. When I came back to Ireland after those 15 years, the biggest difference I felt about the people in Ireland was their communication skills. You have to learn and understand that industry and learn to understand how the regulations work.

A very long time ago, when I was delivering pure technology services to a financial services firm, actually in the UK, I spoke to an American woman who had moved from the US, for a large financial services firm, into the UK, and she said: the first place you have to start in building a new financial services firm is the regulations, because you can only do so many things this way and that way. This was an interesting aspect about building a financial services firm in a new country; you have got to understand what you’re allowed to do and not allowed to do, and the terms are very different from one country to the next.

There’s a lot of understanding of the global regulations in different countries. You never get the expertise anywhere in particular around the world. Nobody ever grew up in the space. An ability to interact, communicate and understand the space that you’re working in is very critical. When I came back, particularly from the US, the communication skills were a huge differentiator for us around the Irish people. Even the technologists who would be very smart about what they would be doing in terms of developing technology, could still talk to clients’ prospects and figure out a lot more about what needs to be done, which was the most challenging aspect.

For us the technology is not the issue; we know how to do that. It was a big difference I’ve found, having worked with various software development teams in the US. In the US there is a very confident sort of group that comes forward, and I always found that they were more pure technologists and people with a mix of skills. I just found it easier to build it in Ireland than I actually would have in the US.

The other side of it, though, for us was that the primary thing is always having a market for whatever you’re going to build, and the negative aspect of Ireland is its size. But that brings us back toward the US being the primary market. For us from the start, when we first created the solution, the target market was the US. Its size in terms of capital markets, which is our focus as an industry, that market in the US is by far and away the largest in the

world. It’s much evolved, it’s highly regulated, there’s enforcement around it, and so we targeted that from the start. The first set of solutions we built was primarily built for US regulations, not necessarily for global.

The other aspect that is very helpful in Ireland is the support from the government. We’re kind of a classic type of entity they like to see. They put a lot of support for FDI firms to come into place. Fidelity Investments would have been one of them, one of the firms that I was working with when I came back to Ireland. Through that, the IDA trying to encourage R&D, gave an R&D grant to Fidelity from which we ended up building out the core of  MyComplianceOffice (MCO).

We separated from Fidelity in April 2008, and we had come away from the IDA to Enterprise Ireland. Policymakers, originally, were looking to bring in the FDIs so that they would create this community of entrepreneurs serving them or serving the world, and we’re a classic example of that. But in 2008, obviously, it was a terrible time to try to sell financial services; they were in chaos. We’re losing money trying to build out this software. We got support then, as well, from Enterprise Ireland, which helped in some very tough times that we had for the first five years.

They provide assistance in getting out to all various countries around the world. Through the Irish diaspora, you get to meet senior people in financial services in all these areas around the world. Part of what we were doing was going to Australia, New Zealand, South Africa, the Middle East, Russia, Japan or Hong Kong. We did all these places, trying to figure out what our market was. It helped us tremendously to figure out, because we’re selling compliance software to financial services firms. Everybody says compliance is in everything, which it is. We came to recognize through that process that the only places that we can sell are where there’s high enforcement and strong financial services. We narrowed down our markets, basically, to the US, Canada, EU, South Africa, Hong Kong, Singapore, Japan, Australia, New Zealand. After that, without the enforcement being really prevalent, there’s not much market for us.

It enabled us to be very focused about that. They gave us some financial support at different times. That was very critical for us during that. But at the end of the day, the core success came from the people. The huge part for servicing the US from Ireland is the English speaking and being a close enough time zone. But the other main major part of our success in going to the US was that we put an office on the ground in the US from day one. We had sales personnel from the start, and then customer support people, because it’s very difficult to do it as a small entity otherwise; you’ve got to show up and be on the ground there. Maybe it’s less intense now with remote working and a lot of people doing a lot of zooms. But they want to feel that you’re kind of American. So early on, we always use the New York office as our headquarters for marketing communications. We have a US entity as well. But it was very key to have people on the ground as well, coming across as a strong presence in the US.


BF: Established back in 1998, MCO has grown significantly and now provides risk compliance technology all over the world. In 2022 the company launched its new Know Your Risk product. Can you give us an overview of what specific offerings the company provides and what kind of impact your technologies have on your clients?

Brian Fahey: Fundamentally, our suite of solutions is compliance for capital markets entities within financial services. You can divide financial services into retail, banking, insurance and capital markets. We’re a capital markets solutions provider. The regulation software industry or regtech, as it is now known, very much has grown out of individual requirements, that people build individual solutions that they use to manage workflow and documents and policies and procedures around it.

The one major difference is that we are an integrated suite on one set of technology. We have things like employee trade surveillance and third-party solution. The Know Your Risk product, the most recent one, is about an overall compliance risk management. The difference that we have for or against all of our competition is they have individual point solutions, and we have one single integrated solution for all those compliance activities for capital markets. That’s our primary differentiator.

For a combination of reasons, in today’s world, where tech firms get invested in a certain way around venture capital, private equity, Series ABC investments, they basically sell to each other as they sell technology companies, all these private equity firms. It’s very unusual that a company can be independently and privately owned by the actual entrepreneur and the founding management team; that they can then have a longer term view. Fundamentally MCO has always had that. By virtue of having that, we were very long term in our nature. That is why we invest in the right kind of single long term integrated solution.

I’ve been in the financial services capital markets software space most of my career. The issue of having data in different places is a very big issue. It really doesn’t work very well to do compliance around different sets of data in different places. The executive management teams of any kind of financial service organization, the extreme majority of them, want to have good compliance, good ethics, and want to have the right kind of culture of compliance in their organizations.

The tools today don’t support it very well; they support a tick to the box against your particular regulatory activities, but they don’t necessarily promote the type of oversight that you really want to know if there are pockets that are not doing what you wanted them to do. The main issue for a lot of larger financial services firms is not that they don’t have policies or procedures; it is not that they’re trying not to abide by the laws and the compliance, it’s they’ll have pockets of areas where things can go awry. The greed is the biggest factor in all of this at the end of the day. Because capital markets have so much money involved in us, and if there are major rewards given to the participants if they achieve certain things, that distorts people’s mindsets and ethical values. When they’ll have certain opportunities to do something that will make considerable money for themselves or even for the firm, so they get benefit out of it, they can be inclined to do that. It’s not that you haven’t put money in for systems, it’s just those systems aren’t actually really good for that.

Our long-term view is creating this integrated platform for any capital markets firm that truly is able to monitor that culture of compliance. There’s a certain amount of big brother, but a certain amount of oversight that you do have, which discourages any of those activities. If you are one of those individuals who might be somewhat rolled in not doing the right thing, the system should not be letting that, and you’ve more likely to get caught doing that. In that scenario, even if you are that way inclined as an individual, you’re less likely to be in one of our client firms. You’re more likely to go to somewhere which might have more lax systems or individual point solutions.

Our view is that the integrated solution is looking around three things. The transactional activity of the capital markets, which basically means funds, trades, holdings, investment banking, the actual transactions they are doing; you’ve got to monitor those. You’ve got to monitor what the employees are doing. And then the third-party business and legal entities that you are either investing in or trading with.

You’ve got to have the long term about your view. You will not make things based on short term: either quarterly if you’re public, or even if you’re a private equity firm with a three-to-five-year cycle, which moves around the fund cycles. That’s our key element about being long term: have a view around what good culture of compliance means from a system monitoring perspective and continue building towards that. It’s a long term 5-to-10-year plan around what we’re doing, but that’s where we’re going.


BF: 2022 has been an incredible year for MCO. The company completed the acquisition of Schwab Compliance Technologies in May. What factors made this latest acquisition possible, and what kind of impact is it having on how the company operates and its possible scope?

Brian Fahey: The first primary benefit for MCO has been the acquisition of all those additional customers. That was the primary goal. We would have gone from something like 550 customers to about 1,300 client firms around the world, primarily in the US. That’s the primary benefit to us, and we are moving them over onto our own platform. All of them will come over from that existing Schwab technology platform onto MCO.

There are pure business reasons for doing this, which is a great opportunity for us to sell the other range of our products to them. You take the costs out of the business. It was actually a very small number of headcount, because a lot of central Schwab groups — their own HR, their own tech — they were all supporting that business, and the people who are really customer facing were actually a small number of headcount; they came up with only about 40 people.

The growth in 2022 has been phenomenal in two areas. In terms of clients, that’s where that came from. But effectively, we’ve doubled the headcount, mostly from more R&D. This

is our investment into the future, about extending out the range of products. That’s the future opportunity for us. It is part of our long-term vision, our long-term goal: to build out the integrated suite of solutions. That’s part of just the next step on the longer-term journey.


BF: With this acquisition it also expanded your global footprint with offices in the US, Ireland, India and Singapore? Is that correct?

Brian Fahey: No, that’s all us really. The one exception is we did pick up an office in Chicago, but we have an office in New York, we have an office in Texas, we have people spread around the US. And again, the number of headcount is pretty minor, relatively speaking to the business.


BF: Let’s talk a little bit then about what international markets are your strongest? What new territories you’re looking to expand?

Brian Fahey: The primary expansion comes from more products to the existing primary markets. Those existing primary markets are the ones that I mentioned early on. For most of MCO’s life, 95% of our income and revenue came from the US. Today, that’s probably closer to 70% to 75%. And that’s because we have grown in all those other jurisdictions.

It’s a great diversification tactic as well.

For us, when we build, we build our software generically; we think about the regulation in broader terms, and we want to make sure it works in all those countries. Canada has been a big expansion as well. But the biggest expansion came from APAC (Japan, Hong Kong, Singapore, and Australia), and the EU has now been getting much larger.


BF: Constant transformation is necessary to keep up with new regulations in all the markets that you work in. You currently spend, according to my research, about more than 25% of your revenue on R&D efforts. How would you assess Ireland’s current R&D capacities, and in what areas is the company currently looking into in its efforts to bring new technologies to the market?

Brian Fahey: Again, why Ireland is so great for our business is about the people side. That’s the core element for why it is great. There are good supports but, for us, it’s not enough to maintain the most of the R&D presence in Ireland. Ironically, our percent of expenditure in R&D has decreased somewhat in Ireland from being 100%, down to being more spread geographically. That’s really been the changing nature of technology globally, and Covid will have accelerated the nature.

Remote working has enabled technology people to deliver services a lot more globally. The reality is that any business that can get services at a lower price, they will go to those places. It’s obvious that India has been around forever; Eastern Europe has been growing for quite some time. The price points, ironically, have been increasing dramatically in India and Eastern Europe, and Ireland is not getting that much more expensive. When we used to look at this, the US was the most expensive for any technology delivery. You used to have India, and the problem there was, of course, that there was a communication issue; there was a difference in those time zones obviously. Communications channels were a big problem from a technology perspective.

Ireland still is that middle place between the US and the rest of the world doing this. So when we were going to APAC, we did have to put an office in Singapore to support them. But we still were able to sell to the APAC and talk to the senior level; and also you can do it to the US. It was a perfect place for us in the middle of those two areas, which will be the primary markets. Because again, in Ireland with, five customers out of 1,500, that was never an opportunity.


BF: You joined MCO just over 15 years ago and have steadily led the company through a ton of growth. Given how well the company is doing this year, you must be very excited! What are your current top three priorities as CEO of MyComplianceOffice, and where do you see the company as it moves into 2023 and beyond?

Brian Fahey: It’s not radically different from any other year. We have a very long-term goal for the firm of what we do for the industry, and it’s continuing that growth. The big difference for MCO now versus five years ago is that our revenue is so much higher, our number of customers is so much higher, and everything is much larger.

When I was first starting off, somebody that became a very good friend, I was asking him when getting some advice from him, and he was saying: the first million is hard, the second million is really hard, the fifth is getting very hard, the tenth is getting easier, and once you start getting from there on, it gets so much easier if you have a good product with a good market and all those kinds of things. We’ve gone into that latter phase. It is very exciting.

Regarding the priorities, we’re still about growth of products, improvement over existing products, driving toward our vision of what we want to have for the industry. But it’s a lot easier now because we can get capital to make acquisitions, we’re more attractive to employees to join us, and we’re more attractive for people who might want to sell their great technologies to us. That’s probably the biggest difference in this time.

We had a very successful year this year. As I talked to all the folks and the teams, I said: this is not about this year, this is a result of 15 years, continually building and striving every year, on top of what you did the year before, being creative about how to solve problems and striving to resolve all the issues that you’d come across building the company. This is the end result. 2023 will be another great year. We’re also looking at more acquisitions, US and European acquisitions.


BF: Is there anything else you’d like to leave now as a final message?

Brian Fahey: I would always say to the Irish entrepreneurs: start with the US, don’t start from “let me try and build up some business, let me try and sell to the local banks here or local firms here.” Go after the US. It’s an easier place to do business. The sheer volume of potential customers means you only need a small number of them. And this is a classic: when you go in there, to many places, with an Irish accent, it does open doors, and it’s been very helpful to have that. Then it’s the Irish diaspora over there; they do help a lot. Enterprise Ireland makes a big difference in trying to introduce you into that because they know what works; they’re very practiced at this. As a semi state agency, they are very highly professional about all this. It’s a light touch Irish way sort of: would you mind coming in and talking to these people from Ireland? It’s a great door opener for firms like us.