I joined Equilibrium in September 2018, but as a business we first started preparing for the senior managers and certification regime (SM&CR) in spring 2017.
Back when I started, the rules were still not finalised, and it wasn’t clear who would be included. However, the early work before I joined involved looking at our job descriptions, and making sure the roles were clearly defined.
I went into full project planning mode for SM&CR in April this year, and started creating a path towards the 9 December deadline.
Having come from a consultancy background, it was great to come into the business and see how much work had already been done, and what was already in place.
A lot of what SM&CR is about, such as culture, and having a clearly defined business structure, was already there. That wasn’t done from a compliance point of view, it’s just how the business is run.
On the culture front, we actually have a ‘head of culture’ as opposed to a ‘head of HR’.
How we treat our financial planning clients, and how we treat our staff, is all embedded within the business. The conduct training that’s required under SM&CR should serve as a reminder of our company values more than anything else.
We’ve had a lot of people come to talk to us about products to help us comply with the new rules, and I was keen to put some training and competence software in place.
I found that when people came in to pitch a lot of the presentations were geared around trying to scare you, for example, “if you don’t have our tool, you won’t be able to comply.” But that message is just plain wrong.
How we've approached SM&CR
Our approach was to split the rules into the three main pillars – senior managers, certification and conduct rules – and tackle each in turn.
There is a requirement to carry out annual ‘fit and proper’ checks on senior managers and certified staff, which we do already.
As part of those checks we want to get a sense of what kind of financial position those people are in.
We want to know that they’re ok, and that they’re financially sound. If not, there’s potential risks, especially for advisers around pressure to sell.
We also carry out credit checks for senior managers and certified staff every year, and credit checks for everyone else every other year.
We plan to do our staff training around SM&CR in two parts – the first part is with our three senior managers and with our certified staff, which for us includes advisers and investment managers. That training is going on now so that it’s done well in advance of the December deadline.
The second part of the training, which will be more focused on the conduct rules, will be carried out with the rest of our team across all staff in Q1 next year.
One of the challenges we came up against was certification, and deciding who needs to be certified and who doesn’t. The FCA doesn’t know firms well enough to make specific rules about who is covered; they can only point to what is likely.
A particular challenge for us was that we’ve got a very high ratio of support staff to adviser staff of about 5:1, which is unusual.
In the end we took the view that while our support staff are qualified and client-facing, they are not the final decision makers and so didn’t need to be certified.
Another challenge we had was that we’re a limited liability partnership.
There was a question around partners, and how many of our partners had to be classified as senior managers.
The call we took was to ask whether someone is really a partner with some influence on how the business is run, or is it simply the case that they have ‘partner’ in their job title.
We also look at whether they’ve got an equity stake, but the more important issue is whether they are making business decisions or are they a shareholder only. We also sought legal advice on our position to get further clarity.
Challenges aside, the SM&CR is the first set of FCA rules for a long time that just make sense.
This isn’t like Mifid II or GDPR, which were pretty indecipherable. These rules read really well, and you can get where the FCA is coming from.
There are a lot of great resources out there for firms who need a bit of reassurance – the amount of work you think you need to do is nowhere near the reality. This is not Mifid II!