Financial Conduct Authority  

FCA hopes SMCR will turn advisers into 'adults'

FCA hopes SMCR will turn advisers into 'adults'

The financial regulator hopes the implementation of the Senior Managers and Certification Regime across the advice industry will foster a more "adult-like" relationship with advisers. 

The latest piece of market-wide regulation from the Financial Conduct Authority is due to be rolled out to advisers on Monday (December 9) in the hope it will establish positive cultures and effective governance throughout the industry. 

Speaking at the Personal Finance Society's annual conference last week, Debbie Gupta director of life insurance and financial advice at the FCA, said the new rules would be a "revolutionary" change in how the regulator engaged with advisers and small firms. 

Ms Gupta said: "I often find that people in this environment will say 'just tell us what to do' and really what the SMCR is trying to drive is a relationship which is more grown up,

"One that says 'you figure out what’s right for you, we’ll tell you what we care about but you know your businesses best'.

"So moving from a parent-child relationship of asking us what you should do, to an adult-adult relationship which reflects that you’ve got a business to run and we’ve got requirements as a regulator - let’s work out how we do that most effectively."

In September the FCA published the findings of its review into how well the rules under the SMCR had been embraced in the banking sector, where the regime has been in place since 2016, finding some companies were not always sufficiently tailoring their conduct rule training to suit job roles within the business. 

The regulator said many firms were still unable to explain what a conduct breach looked like in the context of their business and as a result announced it would be upping its supervision of how companies are embedding conduct rules and meeting their responsibilities under the SMCR. 

Chris Lloyd, head of compliance at Continuum, said the regulator's hopes for an "adult-adult" relationship with advisers would only be successful if the FCA was clear about its expectations well in advance. 

Mr Lloyd said firms best understood what was right for their structure and were not setting out to breach FCA standards, but warned SMCR would only be effective if the regulator worked with senior management and communicates "clearly and constructively" as the regime develops. 

Ivor Harper, director at advice company Park Financial Limited, said the landscape in which the regime might make the most difference was mid-sized firms. 

Mr Harper said: "The problem is that - although the FCA correctly identifies that it's 'all about culture' and that does indeed 'come from the top' - you can't teach people to be moral.

"They either are or they aren't - and, sadly, the structure of far too many big companies rewards most those with the lowest ethical standards."

Earlier this week Jacqueline Lockie, head of financial planning at the Chartered Institute for Securities & Investment, warned advisers were not prepared for the implementation of SMCR next week and would likely still be trying to satisfy its requirements past the regulator's deadline.