Such a loaded questions isn’t it? Yet this is a crucial question we always ask when meeting retail investment adviser firms in the market place. Compliance, as financial advice, is not an exact science and is heavily nuanced and sensitive given the amount of rules and regulations firms are contending with against the background of the FCA’s principle based framework.
What we do know is the fact that firms now need to move away from tick box and checklist compliance and assessing regulatory and professional development and build a ‘balanced scorecard’ across all the relevant regulations so a holistic review can be taken in understanding how the firm is performing on an on-going basis.
With this approach a more visceral understanding of the firm’s culture, competence and conduct is provided which is exactly what the FCA want.
In their 5 conduct risk questions paper published last year, the FCA showcased that it was those firms who had a better overall understanding and measurement of their risk, governance and conduct processes performed better financially probably due to the fact that they can demonstrate high professional standards which is attractive to existing and new clients and encourages staff retention and overall stability.
So how do you know you comply and have a finger on the cultural pulse?
Well, technology can offer support here, in acting as an enabler platform to provide heat-mapped dashboards showing valuable management information and data. This allows firms instant access to real time data that showcases good or poor behaviour.
With The Senior Managers and Certification Regime (SM&CR) on its way, we now see the FCA bearing it’s teeth with penalties such as fines doubling year on year and the main themes emerging for penalties being market abuse, financial crime along with skill, care, due diligence and fitness and propriety.
Essentially firms now need to know they comply, that they have the right competence and conduct standards across their staff and can demonstrate they have the right people in the right place with the right skills and right responsibilities.
Good technology can ensure you map roles, responsibilities, know who does what in the business and allow you to build a lifecycle for Certification and the Conduct Rules for example.
You can also benefit from algorithms that work out where the blind spots are in the firm and provide resources and tasks so you can get on with the business of being compliant. This provides the right mix to ensure a sustainable, professional practice that clients demand
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