He adds: “There are a lot of adviser firms at the smaller end of the scale who are still quite ad hoc in the way they run their business. They are still very advice-focused, rather than being a business that provides advice; there is a subtle but important difference there.”
Adviser tiers
In order to roll out the regime to advisers, the FCA has divided the sector into three tiers: core, enhanced and limited.
While enhanced firms are those deemed particularly large – such as companies that hold in excess of £50bn in assets under management – a significant proportion of advice firms, particularly the likes of sole traders, are likely to find themselves in the limited bracket. But due to a legal loophole, the SMCR does not currently apply to appointed representatives.
The regulator has said it has tried to make the regime as straightforward to comply with as possible. Companies have until December 9 to identify those who are certified and those who are senior managers, and will then have one year to train their staff on the conduct rules.
Businesses must also put together a statement of responsibilities for each senior manager and gain FCA approval for these.
Mr Davidson says: “We wanted it to be very simple. There are many firms that will have a couple of employees or just one employee, and with the vast majority of those they will automatically convert [to the new system].
“We found with the banks that most companies already had a code of conduct, which was a version of the conduct rules in place.”
Mr Percival says that for small advice firms, complying with the regime will be “straightforward”, but cautions that it will mean everyone at the firm is subject to regulation.
Richard Ross, a chartered financial planner at Chadwicks, says: “My quick and dirty test of any regulatory change is to ask whether it will materially impact an already well-run firm – if the answer is no, as I believe is the case here, then it’s probably a good idea.”
Bigger fish to fry?
The SMCR is not the FCA’s only focus for the year ahead. As well as keeping an eye on the issues raised by its recent sector views statement (see Box 1), and completing its platform market study, the regulator will also be returning to two former stomping grounds.
The watchdog plans to follow up the suitability review it carried out in 2017 and, more significantly, begin its review of RDR as a whole.
On the former, the FCA’s 2017 review found the suitability levels of advisory work were broadly high – at more than 90 per cent of cases assessed – but disclosure levels were poor.
