How do you handle compliance within your firm?
We asked several advisers how they run their compliance function and for any tips in helping to make the process more business friendly – including using networks, outsourced and internal compliance resources
As every adviser business knows, while compliance is a key process and priority it can also be a time-consuming and complex to undertake. Here, we look at the different methods used by advisers to handle the compliance functions within their firms.
Advisers running small businesses or just setting up on their own advise they have found that joining a network can offer security and support.
Jonothan McColgan, founding director of Combined Financial Strategies, says he was concerned about the number of regulatory challenges ahead when he set up his business eight years ago.
“I realised that as the owner/manager, compliance would be my responsibility and I was worried that too many other distractions would either stop me from delivering the fee-paying service to my clients or that I might miss or misunderstand a piece of legislation that would come back to haunt me. With this is mind, I felt the network route was the most appropriate.”
As a result, McColgan made the decision to join In Partnership, having reviewed their track record with the FCA, the financial strength of their balance sheet and the details of their Indemnity Insurance.
McColgan (left) says In Partnership provides members with CPD events throughout the year to help them achieve their Statements of Professional Standing. The network also runs two full-day compulsory structured CPD Professional Development Events, where compliance professionals provide full updates. In addition, all FCA bulletins are emailed to members with guidance on what needs to be implemented on a monthly basis and files are reviewed on a regular basis.
Also, he has been assigned a T&C supervisor, who ensures that he has the suitable licenses to cover the areas he works on, and he receives a compliance visit every two years.
However, McColgan says one of the biggest disadvantages of being part of any network can be a prescriptive approach.
“There is always going to be an element of shoehorning your business and its processes into the rules of a network. However, I believe that the inconvenience caused is a price worth paying at this stage to help lead me through the ever-changing regulatory landscape,” he says.
External pair of eyes
It is an opinion shared by adviser Greg Heath, founder of Lancashire-based Derbyshire Booth.
“We are part of a network and so all the compliance is centralised. This has its pros and cons as you would expect,” he says.
Heath cites an external pair of eyes filtering through the all the material as one of the biggest pros, saying it “filters out all the noise and helps keep costs low.” However, he agrees that the biggest disadvantage is that it’s not personal to the individual’s business model and takes a one-size-fits-all approach.
“I find my network judges everybody by the lowest common denominator or the worst IFA practice in the network,” Heath says. “That can create more work than is necessary to meet the FCA requirements at times.”
Gordon McNeill, director, head of Compliance and Risk, In Partnership, says while networks have one regime for all members, it will have been developed in line with the expectations of the regulator.
“All of the requirements of the network will be communicated in advance of an adviser becoming an appointed representative. It is always the choice of the individual if they wish to act in accordance with the network’s compliance requirement,” he says.
The network offers one-to-one and face-to-face coaching and development, delivered by its field-based compliance associates, and says members benefit from having a compliance resource that is fully aligned in all areas of risk and conflict management.
McNeill describes that resource as “knowledgeable, experienced in delivering sound guidance, dependable to deliver regulatory protection and helpful.
“In simple terms, networks should deliver a regime of compliance made easy for users,” he says.
For those advisers for whom the directly authorised route is preferable, staying on top of compliance can be a real headache, with time often better spent on seeing clients.
Hence, many turn to business support companies, whose increasing availability, knowledge and cost-effectiveness make them an attractive option.
Paul Lindfield, managing director of Manchester-based Sedulo Wealth Management, (below) uses the compliance support service of threesixty.
He says: “For smaller firms, the cost issue is huge. To have an in-house compliance manager you would need to pay a high salary in addition to extra resources. In my opinion, it’s only really worth doing if you have a very big firm with many advisers.”
Lindfield says he pays threesixty a set monthly retainer, for which he receives full support, including a suite of suitability templates, technical support, a fund panel as well as weekly compliance and technical updates. He receives access to a dedicated team of specialists at the end of the phone and can request to speak to any team member depending on the advice he needs.
Lindfield also opts to have file checks as an add-on, and currently pays for one day a year, which covers around 10% of his business. He plans to increase this to two days following the recent appointment of another adviser in the firm.
In addition, threesixty provides monthly seminars for its members and hosts ad-hoc events focusing on ‘hot topics.’
“Being directly authorised naturally brings more risk and ultimately, the responsibility lies with you, but outsourcing takes the majority of the burden away and helps you stay on the right side of the FCA,” Lindfield says.
“They have a wealth of knowledge and experience and it’s comforting to know you have someone to go to for advice or any questions you might have. They are a one-stop solution that can be tailored to meet your own needs.”
Internal compliance resourcing
For larger IFA firms, creating a designated in-house role is often a popular approach.
Sheriar Bradbury, managing director of Bradbury Hamilton, employs a compliance manager, and says the London-based company keeps abreast of regulatory changes through a multitude of mediums. But he also uses outsourced compliance services.
“We have membership of SimplyBiz, who visit us on a bi-annual basis, and provide monthly bulletins on relevant topics. We also use FCA bulletins and the financial press to keep track of changes,” Bradbury says.
To ensure advisers and staff operate in a compliant manner, Bradbury Hamilton holds regular training sessions, carries out file checks, observes client meetings and has regular one-to-ones with its advisers.
Managing director of Almary Green, Carl Lamb (left), employs two compliance managers to oversee his 15 advisers. He made the decision to create an in-house role three years ago, having previously handled compliance himself.
Both compliance managers undergo a supervisory-training refresher course every two years to ensure they carry out their job to the best of their ability. The company also uses the services of threesixty.
Compliance manager Jerry Ware says: “Threesixty has a huge presence in the market and a wealth of experience. We pay them a monthly fee, which ensures we have all the back-up we require and access to help as and when we need it.”
Almary Green carries out internal file checks, but also relies on threesixty to carry out further checks on a bi-monthly basis.
Ware explains: “It makes the whole process feel much safer when you have a second pair of eyes going over everything.”
It is an approach also adopted by wealth management firm Turcan Connell. In addition to a five-strong compliance team, the company has also been using the services of Edinburgh-based National Regulatory Services (NRS) for the past 18 months.
“We wanted a local organisation to provide us with regulatory support and we find it extremely helpful receiving a fresh, external perspective,” says Alex Montgomery, chief executive officer, Asset Management.
NRS promises to provide businesses with bespoke regulatory support and consulting assistance, and Montgomery says his firm has been impressed by the muscle and depth offered by the company.
“Compliance is very important to our culture,” he says. “We don’t seek to comply only; we want to comply over and above the threshold. We have put a lot of effort into building processes and the support around those and we have very sophisticated tools embedded in our systems.”
What if you breach the rules?
Bringing in a compliance consultancy to check files, provide updates and to give advice on best practice can provide a firm with greater confidence and comfort that it is doing things in the right way, says Steve Bailey, director of ATEB Consulting. ATEB is a compliance firm and an FCA Skilled Person firm, accredited to undertake Section 166 reviews and will be brought in by companies to help address failings following an FCA visit.
Bailey says: “The FCA is very interested in the culture of an organisation and the behaviour of its staff, as it feels these measures are the main determinants of client outcomes. There are clear areas that adviser firms should be addressing, including transparency and disclosure, the advice process itself and systems and controls – all of which should be focussed on the outcome for the end client.
As part of the process, taking stock of what the regulator considers to be important and making clear and evidenced efforts to adopt best practice and to deliver positive client outcomes, can stand a firm in good stead should it find itself engaged with the FCA.”
Visit threesixty website
Visit SimplyBiz website
Visit ATEB Consulting website
Visit In Partnership website