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Complying trapeze

Compliant or bust. That is the reality of the IFA business environment,

where the penalty for compliance failure is not a slap on the wrist but

more likely a sizeable fine or an order to stop trading.

Understandably then, interpreting and implementing regulatory change is a

serious business. Establishing effective systems to ensure adherence to

regulatory rules is a costly and time-consuming process requiring

pains-taking attention to detail.

One solution is to tap into an established and effective compliance

support mechanism and this remains one of the most compelling reasons for

joining a network.

Prospective network members should be careful to ensure that the

organisation they decide to join is legally responsible for ensuring

compliance and does not offer compliance support without taking the

ultimate responsibility if something goes wrong.

A common myth about networks is that they create compliance rules of their

own. This is not true. Procedures and systems are established to give

members peace of mind that they are operating or transacting business in a

compliant manner.

These services are designed to allow members to concentrate on what they

do best – developing their business and giving their clients the best

possible service while the network looks after the relationship with the


The network takes on the interpretation of new rules, providing and

updating a policy framework within which to operate and monitoring and

supporting members in doing so. This arrangement seems increasingly

attractive in the face of the forthcoming Financial Services and Markets

Bill, which establishes the FSA as a one-stop regulator for personal

financial services.

There is to be a new conduct of business sourcebook, from which new sales

procedures will be drawn, and a new training and comp-etence scheme. Couple

this with the regulator&#39s confirmation that it is keen to see that a level

playing field exists between the compliance and supervisory arrangement of

network members and directly regulated IFAs, and I think network membership

begins to look even more inviting.

Make no mistake, systems for controlling high-risk business, trainee

advisers, new registered individuals, CPD activity and documentation risks

are necessary, no matter how you are regulated. The options are that you

either design, implement, operate and update compliance systems yourself or

pay a compliance consultancy firm to do it for you.

Or you could join a “proper” network. When you add to the equation the

fact that the network takes the ultimate responsibility for getting it

wrong and compare the costs of compliance consultancy with network

membership, then the benefits of networks are plain to see.

An often overlooked element of network compliance is the support given to

members to help them build a better business, not just by saving the

adviser time to get in front of the client but by assisting with the sales

and administrative processes.

Network compliance officers can help advisers introduce best practice into

their processes. Compliance officers have seen so much evidence during

visits of good and bad systems that most networks now include this type of

advice in their regular visit programme.

After all, the good adviser knows how important it is to interpret all the

information on the fact-find to identify all the opportunities.

Most advisers these days do not sell products. They tell clients what they

need after gathering the facts and explain the various options and

alternatives available. The way in which the adviser does this will

determine whether the client buys his advice or goes elsewhere.

Network compliance positively supports this way of doing business and

demonstrates it during compliance visits. Things can still go wrong but

most networks have methods to identify high-risk business areas and member

firms and will adopt different procedures to deal with them.

At the hub of a network there are business functions carrying out these

activities, some supportive, some investigative.

It is no accident that the costs of PI cover and excesses for most network

members are much less than could be obtained as an individual IFA.

Adaptation to changing market influences and circumstance determine the

success of any industry. Networks enable over 40 per cent of today&#39s IFAs

to compete in a continuously changing marketplace by offering a

professional support environment.

Compliance support is an integral feature of the services that networks

provide and has been a key factor in changing the face of the industry for

the better.


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