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MM leader: How can advisers deliver what the FCA can’t?

The Treasury has quietly dropped a regulatory bomb on advisers. It is one that will see them burdened with extra responsibility and a greater compliance headache, not to mention significantly higher costs. Just what advisers wanted to hear.

Advice firms may not have been following the twists and turns of the new senior managers  regime, and, until now, they didn’t have to.

Introduced in the wake of the financial crisis and originally aimed at banks and insurers, the rules are designed to ensure individual accountability when things go wrong at the big firms.

But the Treasury has now announced the regime should be extended to all firms, regardless of size or area of business.

Advice firms will have to check not only whether staff are competent enough to do their job, but also whether they have the integrity to do it. These checks will need to be performed at outset and annually thereafter.

But this is about much more than extra checks. In one fell swoop, the Treasury has shifted the responsibility for ensuring the right people are doing the right jobs from the regulator to firms. On top of that, at an individual level more employees will be on the hook when the FCA finds its rules have been breached.

The Treasury has steamrollered this move without so much as pretending to consult on the reforms. The FCA will consult at some as yet undefined point in the future, but this is purely on the practicalities rather than whether or not to implement.

Of course, all this extra accountability comes at a cost, and as usual it is advice firms footing the bill.

We now have the bizarre situation of firms taking on more regulatory responsibility and being charged for the privilege.

It reminds me of those restaurants where you have a hotplate to cook your own meal and are charged three times the normal bill at the end of it.

The senior managers regime was supposed to be about having a mechanism to go after the Fred Goodwins and Bob Diamonds of this world. It was not about penalising advisers who have already had to jump through all the regulatory hoops put in front of them as part of the RDR.

The FCA has a budget of £479m this year, and has yet to deliver greater accountability.

So how is the average adviser expected to deliver what the regulator couldn’t, with considerably less resources?

Natalie Holt is editor of Money Marketing. Follow her on Twitter: @Natalie_Holt_MM 



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Natalie, your last question is very easily answered. They do not expect us to do it. They simply want to be able to “publicly hang” individuals for not doing what they could not deliver, end of.

  2. I already have 100% accountability for my firm as I suspect do the vast majority of IFA owners. What we don’t need is even more form filling and cost to prove it. I know I am not alone in feeling that financial regulation is out of control and the Treasury is not helping to control it.

  3. Come, come.

    This is exactly what sole traders have undergone all along. What is wrong in ensuring that you have competent people with integrity both at street level and up in the boardroom? This is as it should be. I cannot fathom a respectable journal criticising this.

    In your own pages over the years you have reported individuals and firms whose behaviour has, to put it mildly, fallen somewhat short of what is reasonably expected.

    Bothe for the industry and for clients this latest move is all to the good in my view. High time that the big bananas carried the can for malfeasance under their watch.

  4. I appear to be the only IFA that welcomes this. Anyone using a decent firm of compliance consultants would appear to be doing all of these checks anyway. It allows us as a business to choose who we employ and allow to go face to face with the public. I realise that we take responsibility for this but in reality, we did anyway, we just had an extra layer of FCA guff to get through first.

  5. Trevor Harrington 22nd October 2015 at 3:03 pm

    I cannot believe that some are arguing that “we are too big to be able to make the concept of responsibility carry from top to bottom of the business”.

    What I can believe is that some bureaucrat within the regulator, who has no experience whatsoever of being an Adviser, will now make a career for himself by inventing all sorts of additional pointless and irrelevant paperwork for us all to do.

    In larger businesses, of course the responsibility must carry throughout the organisation, from the bottom to the top – something which has not happened on all too many occasions in the last 20 years. However, that is not the same as saying that the CEO must be fired because some idiot failed to put a guard on a machine in the basement, and the uneducated public are baying for the CEO’s blood.

    I don’t mind people making logical statements of pure common sense, but I do object to the idiots who then embellish it, purposefully misinterpret it, and then get a huge pension and public gong on the back of it.

  6. Having taken a moment to think about the new requirements, we actually already do these checks, reports and forms for the regulator. When I think about it, I have always been responsible so nothing has actually changed.

    All this actually achieves is less reporting to the regulator so even less responsibility for them.

    This then leads to the much bigger question, why is regulation costs growing out of control whilst their responsibilities are falling and their failings are increasing. Just wait until the pension freedoms are reviewed, the regulatory failings in hindsight will be mind boggling. The advisers have well documented this time the coming train wreck.

    The question as always will be, will the Government, media and reporters actually highlight that advisers told them this was going to happen, or as in the past seek to blame us for their failings.

  7. Seriously, there are so many more useful things the Regulator could be doing to sort out this industry- this was intended to stop giant banks doing stupid things and stupid people making stupid decisions without accountability- and probably a well-placed worry if anything I have seen is anything to go on. However at advisor end we are already accountable for everything we do that is the joy of CF1, CF10, CF11 and CF30 authority- so who is this really aimed at?

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