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Diverse reaction

Many adviser firms are looking for new sources of income to help them through the economic downturn and it is not surprising that this trend is showing on the regulator’s radar as a potential TCF risk.

Indeed, FSA director of the small firms division Lesley Titcomb has reminded firms on several occasions that they should not diversify into new areas of advice unless they can demonstrate that they have expertise and controls in place.

But what can you do to give the regulator confidence that you are moving into new areas of advice in a responsible manner? Here are some issues to think about:

  • Technical/market knowledge. Can you demonstrate that it is both sufficient and up to date?

  • Advice skills. These differ from one advice area to another. For example, fact-finding, research, identifying suitability issues and explaining the key information to customers poses significantly different challenges for equity release compared with standard mortgage advice. Role-play or observed interviews can help you assess and develop skills.

  • Advice process templates and guidance. Make sure that the advice process and guidance you use is up to date rather than pulling an old one you used five years ago out of the cupboard and that you are familiar with it.

  • Advice quality reviews. Consider what client file checks you will carry out to make sure that advice quality in the new area is high. Who will do the checking? How many files should be checked initially? Does the file checklist you use cover all the key suitability and information issues needed to demonstrate TCF? How will you identify and take any necessary remedial action when the file is not up to scratch?

  • Supervision of the adviser(s). A robust training and competence plan is particularly important when an adviser moves into a new area or back into an old one. Think about the initial training needs analysis, which should follow from the gaps identified through your initial knowledge and skills assessments. Then implement a training plan to address those gaps.

    Other supervisory considerations include what key performance indicators should you use to flag up potential risks? How often should the supervisor hold one-to-one meetings with the adviser? How will you deliver feedback on results of client file reviews?

  • Assessing competence. Is the adviser fully competent in the new area? How will you assess and confirm competence?

    Neil Walkling is head of compliance services at Sesame

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