To better comprehend how financial advice professionals understand the detail of personal compliance and how this plays out within the advice business, IFA Magazine recently carried out a reader survey in conjunction with specialist T&C and People Compliance platform, HRComply.
The first article in this mini-series looked at how advisers and advice businesses are keeping up to date with the various regulatory initiatives and rule changes introduced over the years. It also zoomed in on the implications for advice firms ahead of the FCA’s new Consumer Duty rules which are set to take effect this summer. It revealed that action is needed if advice businesses are cope efficiently and effectively with the increasing regulatory requirements which have become so embedded in the running of advice businesses.
In this, the second and final article in our series, we outline further key learnings from the survey, this time with regard to how advisers are actually fulfilling their regulatory and compliance responsibilities on a day to day basis.
To help us discover these details, our survey, which was conducted with IFA Magazine readers in March 2023* and in collaboration with compliance, T&C and People Compliance specialists, HRComply, was designed to find out exactly what’s going on with advisers’ attitudes and actions when it comes to personal compliance. What did our readers tell us? Before we delve into more of the detail, we’d again like to thank to all those IFA Magazine readers who took the time to share their views with us on this very important subject. Your input is very much appreciated.
Access all areas?
Given their importance in the advice process, we were particularly interested to find out how IFA Magazine readers would rate their access to clear processes, systems and technology that facilitate an effective compliance process within their business.
Surprisingly, only 17% told us that they have ‘excellent’ access to these key functions. Whilst the majority – 56% – said they have ‘good access’ to clear processes, around a quarter (24%) said they view their access as just ‘acceptable’. 3% admitted they were dissatisfied with the level of access they have, rating it as ‘poor’ or ‘inadequate’. This is clearly an area where there is room – as well as a need – for improvement. That’s especially the case given the new Consumer Duty rules coming firmly into view.
In addition to managing their own personal compliance, certification and competence training, 23% of IFA Magazine readers surveyed told us that they also manage these issues for the wider advice business too, whilst 8% of respondents said that they manage training for a team. In such cases, ensuring that there are efficient and effective processes in place within the business so as to incorporate these additional needs should be noted and integrated. Many firms struggle with maintaining and keeping all such processes up to date and just as importantly maintaining clear audit trails and complete records. This is where an automated IT system such as HRComply’s automated Compliance and Certification Platform offers clear potential benefits.
Keeping up with CPD
Maintaining your all-round competence as an adviser means adhering to the requirements for training and competence (T&C) and through undertaking appropriate continuing professional development (CPD) on an ongoing basis. Encouragingly, 61% of our survey respondents stated they ‘always’ follow the changing requirements of CPD and keep their knowledge up to date, 36% say they refresh their knowledge on a ‘semi-regular basis’, while just under 3% said they do not stay updated and need to do more. From our survey data it seems that this an area where most advisers have a firm grip on what is needed and are making sure that they deliver against those requirements.
Since the RDR banned commission payments to advisers in an attempt to stop widespread mis-selling, identifying those advisers who really are delivering for the business and rewarding performance has not been such a straightforward matter. So, how well did our respondents feel that their business delivers when it comes to rewarding performance of the key individuals within the team?
On this issue, it seems that those surveyed are feeling much more in control. Just 5% believe their business fails to deliver in rewarding worker performance, while the remaining 95% were satisfied with the performance rewards in their companies.
How worried are advisers about non-compliance?
Whilst just less than a third (29%) of respondents said they were ‘not worried’ about the risks presented by non-compliance, the vast majority, 71%, admitted they were at least ‘partly’ worried or ‘very’ worried about not keeping on the right side of compliance. With busy schedules and a raft of administration to handle, it’s relatively easy to see why the requirements of keeping up to date can present a headache for so many advisers. When the consequences of not doing so can be very severe, it is clear that ensuring there are effective systems in place to enable advisers to have peace of mind must be a priority.
Have all these regulatory changes been worth it
When it comes to creating a profession that can really deliver for consumers as well as for all of those involved and working within it, we asked our readers how much of a positive impact they thought all the increased compliance and T&C requirements introduced over the years have actually had on the development of the advice industry.
Interestingly, it seems that our many of our respondents remain to be convinced that it’s all been worth it. Only 9% said they were ‘very positive’ about the impacts, with 37% being ‘broadly positive’. 34% of our respondents said that they believe that all these elevated compliance and T&C requirements have ‘negatively’ impacted the finance industry overall, whilst the remainder, around 19%, said they were impartial – neither positive or negative – to the changes.
With so many respondents clearly worried about the implications of not keeping up to date, we asked whether this might lead people to actually vote with their feet, and consider leaving their career in financial advice, into which they will have invested so much in terms of time and energy to get to where they are. We were surprised to see that more than a third of respondents (38%) told us that the increasing tightening of regulatory compliance makes them ‘more likely’ to leave the industry. Only 7% think the changes have made them ‘less likely’ to leave whilst more than half (55%) do not foresee there being an impact and were ‘neither more or less likely’ to leave their chosen career. Of course, it was encouraging to see that the tsunami of regulatory changes have not affected the career plans of the majority of respondents. However, with the ongoing need to close the advice gap, the fact that so many told us they are more likely to leave the profession has to be of concern.
What can we learn from this?
In part one of our survey round-up, we highlighted how and why action is needed as compliance fatigue may well be having an adverse effect on many advice businesses and advice professionals across the UK. As well as this, the operational/people risk to each advice business in terms of overall Management functions with responsibility for Compliance and People/Operational risk is an area which also needs to be recognised and addressed.
But as we’ve revealed here in part two, we must also recognise the ‘worries’ which advice professionals have about non-compliance. With the increasing compliance burden having a negative impact on individuals involved with the advice profession such that it may lead them to even consider leaving the industry, it is clear that action is needed if businesses are to survive let alone thrive.
Advisers will be working incredibly hard to deliver an excellent service for clients which they value and are happy to pay for on an ongoing basis. On top of that are all the requirements to make sure that you are running a profitable business which can stand the test of time. However, the fact remains that doing all this whilst ensuring that all regulatory requirements are complied with and accounted for with clarity and transparency, is a significant challenge.
This is where an automated system, such as the HRComply platform, which is not only easy for advisers to access and use but also very easy to be on top of, with clear audit trails and records, can really deliver results. The added benefit of the increased peace of mind for all those involved, which comes from knowing that robust systems are in place, is also not something to be overlooked, especially with the big step up of Consumer Duty requirements taking effect this summer.
Being able to sleep at night knowing that your compliance systems are not only robust enough for the here and now but for whatever else comes down the line, will be nirvana for advisers. For the meantime, it seems from our survey data that there is further work to do if advisers really are going to be able to reduce the worry and achieve peace of mind from knowing that their regulatory and compliance activities are all under control.
ABOUT THE SURVEY
The HRComply survey was titled ‘Understanding personal compliance’ and received 108 total responses from IFA Magazine readers. The survey was run online from the 16th – 21st March.
For more information about how your advice business can streamline People Compliance, Certification and T&C whilst reducing the worry and burden of keeping up to date, contact HRComply at firstname.lastname@example.org, 020 3176 7859, or visit their website.