N2 is less than a month away. N3 and mortgage regulation follow next year and, who knows, maybe N4, 5 and 6. Therefore, IFAs are currently facing a bigger compliance burden than ever before.
In theory, N2 creates a single statutory regulator for the financial services industry. However, in reality, there are many others, including some self-regulatory organisations, that have their own codes of practice.
As Corey Boles quite rightly pointed out in last week's Money Marketing, although these organisations operate on a voluntary basis, for most IFAs, the prospect of being named and shamed ensures adherence to their standards.
I am confident that the compliance burden will not shrink as a result of N2 and I also bel-ieve costs will increase. If anything, compliance is going to become an increasingly laborious part of an IFA's job. With this in mind, IFAs should be looking at ways to reduce the time they have to spend on compliance issues while still maintaining the professional and regulatory standards required of them.
Technology is helping IFAs save time in many areas of their business process and compliance is no different. It can rem-ove the traditional paperbased admin burden associated with compliance, freeing up time and resources for IFAs to get on with building their business. The cost of spending time on compliance rather than with customers is a major issue for all IFAs.
However, a survey of 200 IFAs carried out at one of our recent technology seminars shows that IFAs are not taking full advantage of technology when it comes to compliance.
On a more positive note, there are many areas where technology is being indirectly used for compliance purposes. The FSA Conduct of Business sourcebook stipulates the requirement for a suitability letter giving evidence that the IFA has carried out a full review of all the products and providers in the market.
For rate-driven products, this requirement can be met by sourcing a comparative quote from The Exchange. For more feature-driven products, there are a number of electronic research tools that enable IFAs to carry out more detailed research on specific products.
These are just two examples. There are many other aspects of technology that help IFAs meet regulatory requirements or voluntary codes such as mortgage sourcing systems complying with the mortgage code.
The next stage is to build compliance deeper into the sales admin process. The end-to-end sales admin systems being developed for IFAs at the moment have integral compliance procedures. This will automate many of the compliance requirements that IFAs currently have to meet. Workflows and alerts will identify outstanding tasks and ensure nothing is forgotten.
Under N2, senior managers face strict personal accountability measures. Managers can be suspended, fined or terminated if something goes wrong. A whole section of the rulebook is devoted to this issue. An end-to-end sales admin system allows them to easily monitor the progress of tasks and access data for management reports.
The nature of the financial services industry means compliance is always going to be a big issue. Having been a regulator and terminated over 1,000 firms as well as being subjected to a £250,000 fine, I have seen this from both sides and know the reality of regulation. We need to embrace this issue and make sure that IFAs have the necessary tools to meet the requirements of the regulator while still having time to run and develop their businesses.
Jim Gaskin is managing director of The Exchange