What more will be on the cards for advisory firms as the SMR eventually gets rolled out?
Senior Managers Regime rule changes and other guidelines to improve corporate and individual accountability have so far been proportionate.
According to Gill Davidson, group regulatory director for Tenet, the Financial Conduct Authority (FCA) has taken a so-far measured approach to implementing the Senior Managers Regime (SMR).
Fortunately, advisory firms have plenty of time to get their houses in order before the FCA embarks on its 2018 roll out of the SMR across the whole financial services industry.
As Keith Richards, chief executive of the Personal Finance Society (PFS), comments: “The regime will not come into force for the wider financial services sector until 2018 so firms have some time to prepare for the additional administrative processes that will be required.
“Those who plan for the upcoming changes and embrace change are more likely to benefit from the new regime and develop their organisations into accountable, transparent and successful firms.”
And the FCA will have had time to consider how the banking sector coped with the 2016 implementation, as well as the results of the as-yet-to-be-announced wider industry consultation on the SMR, which may well mean fewer hurdles for smaller firms - or at least slightly lower ones.
Ms Davidson adds: “Our engagement with the FCA suggests they are seeking to introduce a proportionate set of rules.
“The key will be clarity in roles and responsibilities with specific statements of responsibility on an individual basis and organisational charts across a business.”
Areas of focus
According to Mr Richards, firms should start to get ready for 2018 by making plans now. He advises:
■ Start co-ordinating now with HR, compliance and legal departments.
■ Develop training programmes.
■ Restructure job responsibilities and adjust job descriptions.
■ Update and introduce new documentation.
■ Brief existing employees regarding important changes to their responsibilities and accountability.
|Checklist of what advisers will need to do:|
|Prepare individual responsibility statements and maps detailing who carries responsibility for which functions, which need to be approved by the FCA.|
|Create individual certification regimes, which will need to be carried out annually|
|Review and revise their compliance and monitoring policies, and ensure all employees - excluding support staff - receive training on the new rules|
|Firms will need to have in place processes to collate and present this information.|
Mr Richards adds: “Firms will also need to reassess whether their senior managers are fit and proper to perform a certification function, and adapt their recruitment processes and appraisal systems accordingly.”
Cost of compliance
When the FCA finally rolls this out to advisers in 2018 (with a possible consultation on this in 2017), there will be extra cost and compliance.
Alexandra Roberts, senior policy adviser for the Association of Professional Financial Advisers (Apfa), comments: “Potential challenges for advisers relate to the increased level of responsibility and accountability, which will come at a cost.
“The SMR was designed to address specific problems in banking and makes sense in large organisations with multiple lines of responsibility.
“For a small advice firm, the new regime is adding on unnecessary regulatory costs.”
The PFS’s Mr Richards also advocates considering an adjustment to your insurance coverage to accommodate the changes to the liability the new legislation will bring.