Diversity is to play a part in the Financial Conduct Authority's assessment of culture at advice firms, FTAdviser understands.
The extent to which this element of a firm’s culture will be considered will depend on the risk of harm associated with it, compared with other risks of harm at the firm.
On top of this, the regulator expects both firms and senior managers to put measures in place to ensure they meet positive outcomes on diversity and inclusion, FTAdviser has learnt.
This is backed up by the FCA’s stance in its annual diversity report for last year, in which it pledged to make its own working environment inclusive and to reflect the society it served.
The FCA said: “We know diversity and inclusion are central elements underpinning good culture in firms — so they are important features of how we evaluate firm conduct.”
Culture at firms is set to come under more scrutiny this year after the Senior Managers and Certification Regime came into effect on December 9. It was already applicable to the banks and insurance companies but has now been rolled out to all 47,000 companies the FCA regulates.
Under the regime anyone who holds a senior management function will need to be approved by the FCA and every senior manager will need to fill out a statement of responsibilities explaining what they are responsible for.
The FCA hopes SMCR will help establish healthy cultures and effective governance in companies by encouraging greater individual accountability and establishing a new standard of personal conduct.
Sarah Drakard, IFA at Cruze Financial Solutions, said it was a good thing the FCA was looking at diversity and inclusion in firms, arguing the industry needed to recognise it was not representing its client base.
She said: “Money is such a personal thing and when you’re letting people into your home and life, you want people to understand.
“Culture plays a part in things such as how you manage your money, parental involvement, or what is left in wills and to whom.”
Ms Drakard added that she “didn’t understand” why the industry was not more diverse because financial advice was “such a great job”, noting the flexible hours could work well for parents and people with other responsibilities.
She said: “What we need to do is encourage people into the industry and make it more accessible. To make sure people see this as an industry that is approachable.”
Financial Adviser is calling on the regulator to do more to encourage, promote and support diversity and inclusion across financial services. Let us know what you think by emailing email@example.com