When it’s time to take control

The pressure on small and medium-sized wealth management firms to invest in compliance is driven firstly by the need to meet regulatory requirements – and thus avoid costly fines – and, secondly, by the need to enhance brand reputation. From the wealth manager’s perspective, the key to this is to take control – and just as importantly be seen to take control – of client and transaction prospecting and wealth manager competence and conduct development.


Sound client-related policy and practice transacted by highly professional, competent and knowledgeable relationship managers will pay dividends and could further justify the costs of compliance by gaining competitive advantage. Simply ticking the boxes and allowing staff to get by with the minimum required standards will not.

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Merely adhering to the rules is becoming more costly and this does not even take into account the opportunity cost of the time when client-facing staff are diverted away from ‘core’ business activities.

There is also the difficulty to quantify costs of embedding a compliance culture within an organisation and be seen to be doing so both by clients and regulators. Whichever way you look at the situation, the compliance cost burden is going firmly upward.

Many firms seem to be congratulating themselves that all of their staff have reached threshold competence qualification QCF level four or higher and are now logging the requisite CPD hours with the relevant accredited bodies. In due course, the statements of professional standing will be issued and many firms will be content with that.

That accreditation, however, is only the starting point. Qualifications, training, continuing professional development, policy and process are all inputs – and obviously very necessary ones. But everything the FCA has communicated since its inception points to a declared focus on outputs – on conduct and compliant market, product, advice and client behaviours.

The problem is that the former approach is much easier than the latter. Investing the time, effort and money to ensure that all the boxes are ticked is far more straightforward than quantifying the results and ensuring they are manifested in the outputs of the firm. By ‘outputs’ here, I refer to the product and service deliveries, the quality of the adviser outputs, their market and client conduct and, most difficult of all, the ethical culture of the business itself. These are not always easy criteria to quantify.

Most firms have only just got to grips with delivering the inputs and now they are being told that will not be enough. So what must they do? Here is a simple checklist.

■ First and foremost, every firm must define its own set of standards and benchmarks in terms of competence, performance and conduct.

■ They must be clear on what good looks like. Set the standards and then drill those standards down through the business – through policy and process, training and development and the general development of cultural attitudes.

■ These standards should be embedded through effective performance management, with clear expectations, objectives and competencies for every adviser – in every area of their work.

■ Assessment is the critical next step. The often weary annual appraisal is just not enough. Ongoing assessment of key indicators in all areas of delivery is what is required. This means daily, weekly or monthly assessments against key performance indicators, with clear benchmarks. Where shortfalls occur – whether they are concerned with falling behind with CPD or not completing transaction suitability forms – these must be identified immediately and dealt with.