I am referring to The Senior Management Regime, which is due to filter through to personal investment firms in 2018 and will replace the existing Approved Person Regime.

Am I really going to be subject to the same rules as bosses of the big banks, for which it was intended?

Do firms such as ours and other Financial Planning businesses on our scale really need to be treated in the same way?

It’s important to confirm that final guidance is not yet confirmed, but we have an inkling of what might be included*.

The Senior Management Regime was effective from March 2016 for banks. There’s been plenty of comment (and I’m sure you’ll get a not very polite response from the average person on the street) about the need for reform in the banking sector.

But is this reform really needed in smaller firms? Are the poor practices identified there really an issue in smaller businesses? And how do we contend with yet another layer of compliance?

Will extraordinarily detailed “Statements of Responsibility” and “Responsibility Maps” really be needed in a small financial planning practice? Of course, accountability is key, but there’s a clear line of responsibility in small owner-managed businesses.

In my business (and I’m sure in many other similar Financial Planning businesses) there is a clear line of responsibility – the buck stops with me! Do I really need to be compelled to create the same rafts of documentation that we would expect of banks? It’s just simply complete overkill!

Based on the current consultation papers, the new rules could mean that only senior individuals are visible. So, whilst all this additional compliance is required at Senior Manager level, there would be no register for individuals.

Although not providing any indication of the quality of someone’s work or their level of qualification, the current register provides a simple and easy solution to confirm someone’s employment history, useful for both consumers and potential employers.

With advisers maybe no longer needing to be pre-approved by the FCA, but with responsibility for checking they are “fit and proper” now lying with the employer, does this mean that I’m going to have to personally check the accuracy of the employment history of anyone I look to recruit to an adviser role? Another onerous task I and other business owners could, I’m sure, do without!

Why can’t the current register be maintained alongside a much less onerous Senior Management regime?

What my compliance consultant told me:

* Our own compliance consultant provided us with a full and detailed explanation, summarised below:

• Senior managers will include board members and executive committee members, but could also include individuals who have ultimate responsibility and oversight of activities such as compliance, IT, HR, etc.
• Senior Managers will need to be pre-approved by the FCA and will be subject to annual fit and proper assessments
• “Statements of Responsibility” will be introduced, to include a succinct, clear description of each responsibility and to be submitted along with the pre-approval application to the FCA
• “Responsibility Maps”, essentially a comprehensive organisational chart, showing reporting lines and who is responsible for what
• All Senior managers will have a DBS check conducted on them and references must be obtained
The Certification Regime will apply to individuals who are not a Senior Manager but who can cause significant harm ie a “Significant Harm Function”. These will not have to be pre-approved by the FCA but it will up to the firm to determine and have evidence that they are fit and proper for the role.

Nicola Watts APFS Chartered Financial Planner, Chartered Wealth Manager, CFPTM Chartered FSCI - director of Jane Smith Financial Planning

After joining the family business in 2000, Nicola qualified to provide advice in 2001, and has been a director of the business since 2006. Since the retirement of her mother (Jane Smith), Nicola bears sole responsibility for the management of the firm, and the advice provided to clients.
Nicola is married to David and has two young children, Emily and Olivia, and Poppy the black labrador.