The Model Office Blog

A Christmas Compliance Ghost Story

[fa icon="calendar"] Dec 19, 2019 4:50:33 PM / by Chris Davies

The wind rattled the windows and the faint songs of carol singers could be heard as Ebenezer Scrooge huddled in his cold bed clutching a mug of hot water. “Bah Humbug” he exclaimed, “Christmas, a distraction from what is important…money and more money..” he barked to himself.

Scrooge had had a good year financially, yet again his IFA practice had made significant gains, but he’d lost staff and clients weren’t happy….his persistency rates were poor and the regulator had come knocking based on his exceptionally profitable pension transfer campaign.

Suddenly, BANG, his bedroom door opened and in walked his old Public Relations Director Mike Barrett dressed as a Christmas Elf…. “Scrooooooge…..Ebenezer Scrooooooooge….you must change your ways…get back to when you were compliant and your clients were happy….its the only way, the FCA section 166 is coming…you must change back…you will see why…” Then nothing, the door slammed shut, Scrooge open mouthed threw his cup in the air water spilling all over him…”What” Scrooge shouted, “what was that….too much water and sleep..Bah” he shouted…

Scrooge climbed down out of the bed, his feet cold as ice on the stone cold floor slithered to the door, he opened it quickly and there in front of him was….Rory Percival in a Father Christmas suit sat on a big rocking chair by the fire place looking straight at Scrooge with the sternest of Percival looks on his bearded face…

“Ah, Scrooge, you’re up good, it’s time we had a little chat” exclaimed Percival.. Scrooge fell to his knees shaking and groaning.

“I’m the Ghost of Christmas present and let’s face it, Scrooge Financial is a profitable IFA, making significant gains eh Scrooge” Scrooge eyes wide open nodded slowly. “Well done you must be happy” said Percival.. “But, let’s take a look at what’s really going on shall we?” Percival arose out of the chair, and took a step to the right as a projection appeared above the unused, cob webbed fireplace…

 “Scrooge” He exclaimed “take a good long look at the products you have advised your clients to buy!” Scrooge looked at the projection.. Amazon Rainforest Rejuvenation Fund appeared in bold letters above the unused fireplace…

“You have ONE product Scrooge for a client base with a rainbow of needs” Proclaimed Percival.. ”Not only that, the fund is structured and sits on one platform, has a lock in for 25 years and pays 25% ad-valorem fee to your business! You also sell this through a tax wrapper which provides a further 10% fee , on top of this you charge your clients a one-off performance fee of 8% pa”

Before Scrooge could answer, Percival carried on “You also have a pension transfer service with a contingency charge of 10%, which utilises….only ONE fund That Amazon Rainforest Fund! I could go on Scrooge, I could go on as you have not even concerned yourself about your training and competence requirements around the SM&CR and seem to be banking on being grandfathered across to a SMF 1 role with no view on your new responsibilities, your Statement of Responsibility is a job description and your Prescribed Responsibilities are all taken care of by YOU, you think the Certification Functions don't apply until your re-appear on the FCA new Directory, your team is crumbling, you do not know who your SMF16/17 are and many are leaving and those that stay have no idea of their responsibilities or their accountability and as for reasonable steps….but it wasn’t always like this was it Scrooge, look…” The next slide appears with current PFS President Adam Owen wearing deer antlers and bells turning to look at Scrooge from the fireplace.

“Ah Ebenezer, my old friend” said Adam with a huge grin and a bell jingle. “I’m the ghost of Christmas past and look when you were a member of the PFS and you had passed your chartered financial advice exams, you were active giving speeches on client centred advice, segmenting your clients by their behaviours and needs not based on demographics and aligning with product governance aka PROD…you were one of our most professional members Scrooge, inspiring those up and coming professionals to build client-centred businesses…and you were making more profits than you were now, remember what you used to tell me….happy clients makes for a happy business…”

Adam disappeared with a bell ring and a chuckle and Percival stepped forward “now look and see what a former compliance support CE thinks” The next slide appeared with Phil Young dressed as a Christmas Pudding speaking directly to Scrooge;

“Your future is not determined Scrooge” said Young “Scrooge Financial can go one of two ways…you can employ RegTech and Compliance Support Services that will apply strong Governance, Risk and Compliance controls, align you with your client’s needs so you will ensure they receive suitable advice, train your staff so you have the right people in the right job with the right skills and responsibilities…in other words go back to your days of placing others needs first OR…you carry on, the FCA review your actions and you end up with a significant fine and being held at her majesties pleasure, plus your business will go to the wall with soaring Professional Indemnity Insurance costs and Financial Ombudsman fines…and you can forget about trying to phoenix your business, forget it Scrooge, the FCA task force will be onto you like a ton of bricks”. Young disappeared chanting “Up the Shakers…Bury FC

Percival walked towards Scrooge booming “Remember the golden rules Scrooge, COBS 9A.2.19, COBS 6.1A.16G, COBS 23.3 and in particular COBS 2.1.1R the best FCA rule ever!” Scrooge covered his face as Percival loomed over him…

Scrooge woke up, it was Christmas morning and you can guess the rest!

The festive moral? Don’t rest on your laurels and assume you comply, always be learning and gain professional and tech support….

Merry Christmas and a Prosperous, Healthy, Happy and Compliant New Year

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Topics: Financial regulation, Financial business development, fintech, regtech, Risk management, practice management, FCA, advice, HMT, suitability, FAWG, FAMR, MiFIDII, SMCR, Data, GDPR, Chatbot, Culture, Enforcement, supervision, audit, Conduct, AI, Risk,, Accountability, Platforms, PROD, Product governance, digital,, Regulatory, Reporting, HRD, PII

Chris Davies

Written by Chris Davies

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