PIMFA Journal - Spring 2019

The Personal Investment Management & Financial Advice Association

JOURNAL

SPRING 2019 Building Personal Financial Futures

Contents 04

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Transforming the Wealth

The Threat From Within &

Industry Insights:

Cash Management Can

Floating a Law Firm

Helping Young People

Management of Today and

The Use of AI in Regulated

Unlocking The Potential of

Grow Your Business

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Have an Understanding

Preparing for the Future

Firms To Combat It

Wealth Management

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Rosenblatt Group plc

of Money

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Insignis Cash Solutions

APPWAY

Elephants Don’t Forget

Profile Software

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PIMFA, The Senior

Older Workers Represent

Upcoming PIMFA Events

Hacker Girl Episode 6

What Do I Get For PIMFA

Managers and Certification

Huge Talent Pool

Calendar

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Membership

Regime and You

For Employers

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PIMFA

Royal London

---NMBA

Risk Management Group

Transforming the Wealth Management of Today and Preparing for the Future While there are certainly some frontrunner organizations successfully harnessing digitalization, many financial service providers are not yet stepping up with the required amount of determination to gain a specific market advantage from it. In many cases, it is unclear if a bank’s digitalization activities follow a strategic plan, and how these activities can benefit the institution’s customers or increase immediate profitability.

Digitalization: The Biggest Challenge and Opportunity Facing Banks Relationship managers support customers— from retail to ultra high-net-worth individuals (HNWIs) as well as institutional and corporate clients—with financial inquiries. These include opening an account, investing money, asking for a loan, or accessing a mortgage, all of which begin with onboarding the client.

For new customers, onboarding almost always takes a long time. Relationship managers provide product advice and collect required information and customer documentation, including “Know Your Customer” (KYC) details and necessary signatures. The relationship manager then records the data in the bank’s system. Via an automated workflow, this passes to the back office, where the data is reviewed.

Some financial institutions have recognized that customer acquisition in the age of digitalization should not be dependent on the “broker function” of the relationship manager nor solely on a physical presence (such as a branch office network). The starting point for a digitalfirst customer experience is simplified digital onboarding—something that 39% of firms are already offering to retail customers, and 48% to institutional clients. By 2022, the use of online methods will rise as offline methods decline (see Figure 1).

Onboarding Channels

Preparing for the Future: Enabling the Next Generation of HNWIs

Apps (+23 pts.)

As Generation Xers hit their prime earning years and Millennials enter into the workforce, they are taking center stage as the new generation of investors.

This breed of investors is tech-savvy and selfdirected, seeks work-life balance, values freedom and responsibility in the workplace, and dislikes micromanagement.

Internet (+22 pts.)

They are cautious about their data, monitoring what is collected and how it is used. This is particularly relevant now that GDPR has given them the power to erase their privacy consent in cases of irrelevant or intrusive communication. In addition, they believe in their ability to understand their own financial situation, keeping themselves informed and open to co-create the best product and services combination with their bank.

Telephone (+15 pts.)

They also take a more financially proactive role in societal wellness, considering that they are twice as likely as other generations to invest in companies with a stated social or environmental impact. The next generation of investors is moving away from the old return on investment concept in favor of a more tangible approach, not only focusing on financial returns but also giving value to their time and trust.

Email (+9 pts.)

Face-to-face (-10 pts.)

On top of that, a big portion of Gen Xers and Millennials—with the wish to invest their wealth and create a financial plan for their future—differ from the traditional HNWI profile. Most of them belong to the so called “mass affluent” segment, with banking behaviors that are in between typical retail banking and wealth management clients.

The mass affluent request more information, look for safe savings and investment products, show interest in new technologies and digital banking, and are interested in banking across regions.

Postal mail (-13 pts.)

Figure 1: How customer onboarding will change by 2022

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New Shopping Experience

The question facing the wealth management industry is, how can technology enable its digital future and help institutions build connections with a new generation of HNWIs?

This is particularly true in industries where tailored services are essential to serving the customer, such as in financial services. Customer experience nirvana is achieved when companies go where customers are and interact with them Here is a 4-point essential checklist every how they prefer, with the full customer experience bank should consider when planning their and lifecycle in mind. digitalization future: By embracing this mindset and focusing on 1. Use data to personalize digital and human interactions instead of merely touchpoints, businesses can enable a truly Many clients think that banks essentially offer the connected, adaptive, and personalized yet same products, mobile experiences, and types of consistent customer experience that begins at the accounts. With artificial intelligence and cognitive prospecting and onboarding phase and continues technology, banks will be able to personalize their throughout the entire customer lifecycle. customers’ experiences by predicting what they need instead of simply trying to sell them the How can banks get closer to their customers? The newest product. answer lies in creating a complementary balance between artificial and emotional intelligence.

2. Collaborate to create value If financial institutions succeed in effectively combining both, they will become “empathic Instead of a bank trying to do everything banks,” able to detect crucial events in customers’ themselves, an ecosystem of technology partners lives and create tailored offerings according to that specialize in different areas will create a individual profiles. well-rounded customer experience. As clients’ expectations evolve, they will expect services Author: Madli Lillemagi, Marketing Manager that are up to their standards and accessible in EMEA & APAC, Appway one place. www.appway.com

Evolving Needs

3.

No Re-keying Data

Legal Checks

No innovation is perfect from the start. For instance, today’s chatbots offer uneven experiences and are not developed enough for extensive use in financial services. But once chatbots have access to real-time data—which will happen soon— they will advance exponentially. By investing in innovation in its infancy, banks will not have to play catch-up when big developments take place.

4.

Pick and Configure

Frictionless Data Gathering

Retain the Human Touch

True customer-centricity is now defined as being present wherever customers are. Customer preferences vary by individual, situation, and task at hand, and they fluctuate and evolve as new devices and channels are introduced. For today’s businesses, it is a tremendous effort to keep pace, if not already unsurmountable.

1 https://thefinancialbrand.com/71459/millennial-wealth-management-banking-digital-cx-trends/ 2 https://www.linkedin.com/pulse/millennials-view-roi-what-advisors-can-learn-from-walk-april-rudin/

Figure 2: Continuous onboarding

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The Threat From Within & The Use of AI in Regulated Firms To Combat It

Recent polls of compliance professionals in the FinServ sector are agreed that perhaps the greatest compliance challenge facing their enterprise is ironically their own employees.

Many FinServ firms deploy a 3-lines-of-defence risk governance model where the first line of defense is the firm’s own management. The rationale being, management is closest to the day to day operation of the business and therefore, in the first instance, is probably best placed to oversee, control and mitigate risks. 3

Perhaps a more precise measure would be that in 2018 our AI (Artificial Intelligence) conducted more than 54 million individual employee interventions and established that employees knew on average just 52% of what they were required to know to perform their role optimally and within the regulations. OR looked at more simply - on average employees know just half of what they have been taught.

As more and more Senior Managers recognise the very personal nature of modern regulation in the FinServ sector, so increasingly they are looking beyond box ticking and asking themselves (and others) “just what do my employees actually know and how competent are they, really?”

Few would argue that this is an inappropriate structure but what’s becoming apparent is that despite being “closest to the coal face”, management lack any credible or accurate way to quantify individual employee risk.

(Collective risk management being more the domain of the 2nd and 3rd lines of defense and the subject of a different article).

Many rightly, as the evidence supports, suspect that genuine competency and adequate levels of knowledge vary wildly from employee to employee and tenure in role is often a poor yardstick. The challenge though, is that managers are required to control and mitigate risks arising from their employees.

Historically, therefore, quantifying the actual level of knowledge and competence and continuing to do so on an on-going basis is, in reality, impossible.

How, for instance, is the Director/Manager of Customer Services to adequately quantify the knowledge and competency of her 120 employee team? And why is it actually necessary that she does? Rigorous auditing of the process and documentation has become the norm, but this is imperfect and relies massively on the assumption that in order for the (supporting) governance documentation to be correct the individual employee must therefore know what they are doing.

Which means that, if you are a Senior Manager performing 1st line of defence activities, just how comfortable do you feel that you are able to accurately and meaningfully provide that quantification of capability and knowledge - of each and every individual you are responsible for?

Our first-hand experience from more than 400 sales interviews with Senior Managers in the FinServ sector confirmed that less than 1% (yes one percent, you read that correctly) of those firms believed their employees actually knew what they had been trained on, in relation to the regulations or “required learning”.

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Increasingly, more and more regulated firms in sectors outside FinServ are adopting and deploying affordable and powerful Artificial Intelligence (AI). For example, 1 in 5 retail energy customers interact with an agent that is supported by our Artificial Intelligence.

Automotive brands, law firms, insurers, banks, building societies, pharmaceutical, telco and energy firms are switching on to the power and ease of use of AI. Imagine, if as a Senior Manager (as defined by the Act) or even a Team Leader you could at the click of a button understand precisely the current, right-up-to-date, knowledge and competency profiles of each and every member of your team.

And then relax safe in the knowledge that the AI will find and fix any gaps and show you where systemic risk lies in your workforce knowledge and proficiency.

Only AI can achieve this level of compliance and visibility with so little effort, so if you are a Senior Manager or a compliance professional it is likely in the next couple of years AI will play an increasing role in your daily life.

Author: Adrian Harvey, CEO of Elephants Don’t Forget

1 in 5 retail energy customers interact with an agent that is supported by our Artificial Intelligence.

https://elephantsdontforget.com/

3  https://www.iia.org.uk/resources/audit-committees/governance-of-riskthree-lines-of-defence

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Industry Insights: Unlocking The Potential of Wealth Management The global asset and wealth industry is experiencing a digital transformation across disciplines. Customers’ increasing demand for unique personalised experience, new regulatory requirements along with technology advancements are reshaping the sector. Thus, Asset and Wealth Managers, who quickly adapt to these challenges and renovate their operating models and processes, can achieve impressive revenue growth.

In the EY Wealth Management Outlook -2018 survey a global growth and an unparalleled ongoing transformation in the industry is expected. Among others, it highlights:

Report findings show that

automation could achieve cost savings of approximately 30–40 percent. Opportunities have emerged for new technologies to replace backand middle-office repetitive, manual and cost-inefficient processes, with process automation delivered on a continuous basis.

As mentioned in Deloitte’s report ‘The future of asset serving: Shaped by three disruptive technologies’, “A huge wave of technology disruption is heading toward the asset servicing industry.

Within a five-year timeframe, robotic process automation (RPA), blockchain, and cognitive systems will have a dramatic change and a profound, lasting impact on service providers’ operations”. In the report, Deloitte underlines that the rise of disruptive technologies can offer great opportunities to incumbents to achieve improved productivity, minimise operational costs, reduce risk and comply with regulatory scrutiny, while enhancing client service and expanding to a wider range of market segments, competitively.

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25%

30%

The global volume of net investable assets of high-net-worth individuals (HNWI+) will increase by around 25% to almost US$70 trillion by 2021.

Holistic wealth management (looking at more than just the numbers, encompassing all aspects including the emotional satisfaction) will emerge as a new kind of digitalised business model. Holistic wealth managers are expected to gain a market share of 30% by 2025.

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It is becoming clear that added value is created by focusing on digital infrastructure as it provides a holistic viewpoint of the client’s wealth condition and offers unique and personalised advice while improving operational and cost efficiency along with regulatory compliance.

This becomes apparent from the fact that early adopters are experiencing numerous benefits. Among the early adopters, digitilisation is delivering operating leverage through the so-called network effect. When a solution, product or service is perceived to be more valuable, as ever more people use it, this concept, in conjunction with the setup of scalable business platforms, underpins the success of today’s modern AWM’s. A new dawn beckons.

One of the biggest changes in the AWM (Asset and Wealth Managers) universe centres on the client experience. This must be customised, seamless, Profile Software, capitalising One of the biggest intuitive and user friendly on years of experience in the changes in the AWM - based on interactive investment management (Asset and Wealth tools, mobile performance industry, delivers a range of capabilities and online innovative applications with Managers) universe portals. All these will be advanced capabilities. They centres on the client deployed in a client-friendly are globally implemented, manner to deliver wealth and available either on premises experience. portfolio management as well as or in the cloud providing account integration, investment unparalleled flexibility, scalability insights and client-to-client or and superior service to both the client-to-manager social media organisations and their clientele. connectivity. Numbers of AWM firms The solutions’ modularity enables are shifting up a gear and moving towards this firms to utilise the desired functionality and achieve model, where clients are receptive to insights, yet efficiencies and operational excellence on a single still able to cover many of their investment needs and secure platform. in their own time. Therefore, tech-savvy AWM who embrace the full potential of the digital revolution Author: Robert Adler, Business Development Director, and implement innovative solutions will better Profile Software compete in the evolving market environment. www.profilesw.com The key driver to unlocking the potential of Wealth Management will be to better adapt to changing client behaviour, under which wealth management will increasingly evolve from being supply led to demand led over time.

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Tech-savvy AWM who embrace the full potential of the digital revolution and implement innovative solutions will better compete in the evolving market environment.

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Cash Management Can Grow Your Business The new kid on the block How to solve the £1.6 trillion problem? You may ask why £1.6 trillion is a problem, but it is when that is the amount of cash languishing in high street bank accounts earning little to no interest.

Charities, businesses, local authorities and individuals often don’t have the time to manage their cash in order to get better rates and some don’t think it’s worth it in such a low interest rate environment.

A number of clients are not aware or wary of the smaller ‘challenger’ banks in the market at the moment. They have rapid growth objectives and as a consequence often offer better returns than the traditional high street names to attract deposits.

Market uncertainty is another reason that clients should take advantage of a cash management platform and the FSCS protection that each bank, Cash is often overlooked in a financial asset under their own license, offer clients. With a cash portfolio as the return is perceived as low in relation management platform, you are able to open to other asset classes. The administration of multiple bank accounts, with only a single setup.

Ideal for when you have a cash in order to get a better interest rate is balance of over £85,000 very time-heavy and therefore not seen or a temporary tranche as an adequate return on investment.

With the of cash that could be However, current volatility in the increased attention working harder such equity markets have led to a as the proceeds that cash management number of large wealth managers of the sale of an increasing cash allocations and is receiving in the current asset, money utilising platforms to maximise market, it’s the next logical set aside for returns. They have recognised step in a firm’s armory to a tax bill or an that there is a huge deficit in the inheritance. management and consequent help clients. Don’t let uplift that cash can bring to the cash be someone table for their clients and can go a else’s door opener. way towards decreasing the gap.

A number of clients are not aware or wary of the smaller ‘challenger’ banks in the market at the moment.

They have rapid growth objectives and as a consequence often offer better returns

What’s in it for the client?

Stating the obvious: they’ll get more interest for their savings. But cash platforms are not only about getting the best rate at the time of opening the account, it’s the continual management of that cash to ensure it always gets the best interest rate. That takes time, monitoring and patience, all of which platforms have.

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As a Wealth Manager, there are also a number of benefits to managing client cash with the help of a cash savings platform: 1. A Client Service Proposition Clients have traditionally segregated their banking from their financial advice. Having a cash product gives the advisor the ability to incorporate cash deposits into a holistic overview of clients’ portfolios and allows an advisor to see the ‘whole of the moon’.

2. Cash as a Business Development Tool Not only does a cash management platform give advisors full visibility on existing clients’ portfolios, it also gives them the opportunity to prospect new clients. This can start from an existing client base but, more excitingly, can be achieved through professional partner firms, such as accountants and solicitors to prospect new clients.

Most client scenarios that solicitors and accountants deal with start in cash; powers of Many advisors are now incorporating the cash attorney, inheritance cases, tax bills, trusts and proposition into their annual review processes divorce cases to name a few. These cases can and their client service descriptions or often be complicated, and it can take months to propositions. Adding material interest income to open a single bank account to host the funds. A a client’s cash position can be a great part of the Cash Management Platform partner has direct overall proposition discussion. lines into banks meaning that any complicated cases can be discussed, and bespoke solutions For example, a recent client had sold a business offered. and was unsure what to do with the proceeds.

Her advisor suggested she open an account “With the increased attention that cash with Insignis to hold the funds in cash, earning management is receiving in the current market, interest and fully eligible for FSCS protection, it’s the next logical step in a firm’s armory to help whilst they decided how to distribute her funds clients. Don’t let cash be someone else’s door long-term. Six months later, a percentage of the opener.” funds were withdrawn from the Insignis service and distributed across different asset classes. If an advisor can offer a straightforward solution The cash set aside to cover the tax liability has to problems your partners so often encounter, been placed with Insignis until January 2020 to it builds a strong relationship and also gives enhance the return and security. you visibility on clients that may be in need of a financial advisor.

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3. Protecting Clients from Competitors Finally, a cash platform can protect existing relationships with clients. This protects the advisor from client contact from either a bank or a competitor. If a large deposit hits your client’s current account, it is highly likely that they will then be contacted by the bank. Also, with many nationals building in-house cash propositions, the timing could not be more pertinent.

Don’t let cash be someone else’s door opener.

Insignis Cash Solutions is an independent cash management service provider. They have partnerships with a large number of banks in order to get better rates for individuals, businesses, charities and trusts to name a few. A single sign up process means as little hassle as possible for clients and businesses alike in order to benefit from better interest rates due to the effective management of the cash deposits.

Author: Paul Richards, Chairman, Insignis Cash Solutions www.insigniscash.com

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Floating a Law Firm The flotation of law firms has been one of the stock market trends that have emerged over the last year. When Rosenblatt floated in May, we were the fourth firm to come to market and at the time, the largest in terms of money raised. There are other firms expected to follow, representing a major shift in the legal sector. For as long as anyone can remember, law firms across the UK have adopted partnership structures. However, changes in the legal sector including competition and the impact of technology, as well as cultural shifts in how people approach work, mean that many law firms are increasingly looking at new ways to thrive in the future.

the advent of alternative business structures, the so-called Tesco Law, which has allowed more and more non-law firms to offer legal services.

At the same time, new technology including the automation of low-value legal work or big data services speeding up disclosure and analysis, are all putting pressure on fees. For many firms, the future lies as part of a larger company. Some of the capital raised on flotation will be used to fund acquisitions with the opportunity to offer equity as part of the deal.

Second, flotation means we can take on more cases. The proceeds are being used to underwrite more of Rosenblatt’s litigation portfolio and increase the number of cases we are undertaking on either a conditional fee or damages-based agreement basis. These types of arrangements generate superior returns compared to the traditional time-based agreements. Rosenblatt has one of the highest success rates from these types of Alternative Billing Arrangements in the industry, winning 84% of its litigation cases heard in the Chancery Division over the last six years.

The funds will give the Rosenblatt Group the capability to take on more cases where there is a third-party cost element. Many cases cannot proceed without external funding, which has led to the rise of litigation funders like Burford Capital.

The ability to help fund part of the case will allow us to retain the funding margin which would otherwise have been paid to an external funder.

We decided that coming to market was the best way to deliver on our ambitious plans for growth.

We are a professional legal services firm, which includes one of the UK’s leading dispute resolution practices in terms of success rates. Rosenblatt is different to many other firms in that it is led by an experienced and specialist management team, headed by myself, a non-lawyer! My background is in business, having run, floated and sold Brands Hatch Leisure Group nearly 20 years ago before running a family office. Motor racing to law might seem like a big leap (although I was Rosenblatt’s first ever client) but in both sectors the focus is on delivering results for clients. A law firm run by a specialist manager means lawyers can focus on what they are good at and allow the firm to be run without distractions. We believe that firms run by lawyers often focus too much on revenue rather than firm wide profit which can restrict innovation.

After I was appointed in September 2016, I was set the task of looking at what the future of Rosenblatt should be. In the end, several factors guided our decision to float.

First, flotation will allow us to be a leader in the expected consolidation of what is a fragmented sector. There are 10,000 law firms in the UK – many with just three or four partners – and they are being pressed on fees, facing recruitment issues and dealing with disruption from new technology. The industry has never been more competitive, with new entrants encouraged by

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Third, a principal motivation for flotation was to allow Rosenblatt to reward all fee earners with equity participation in the firm and to better attract and retain talent. Under the traditional partnership model used by most law firms, junior members of the team face slow career progression. They also increasingly want more flexibility in their work rather than merely joining “the partnership track”.

Law is infamous for offering little or no work-life balance, something which is seemingly becoming increasingly important to junior lawyers and employees in general. Across the industry, more rumblings are being heard from those who are not willing to sign up to 30 years of long hours on the off chance that they might be made partner and given equity.

The legal services market is currently worth up to £32 billion and is forecast to grow to £40 billion by 2021

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It has traditionally been common in partnerships for a disproportionate profit share to be controlled by a small number of equity partners. With no way of realising the value of the equity unless someone buys it, there is no incentive for these partners to move on, blocking new talent from ever reaching the top. An equity ownership model where staff are encouraged to share and invest in their firm is now a crucial part of Rosenblatt’s culture and we have been encouraged by the enhanced levels of productivity and focus across the Company since the IPO. Finally, law firms offer an excellent opportunity for investors to tap into the long-term growth of the UK legal sector. The legal services market is currently worth up to £32 billion and is forecast to grow to £40 billion by 2021, at a compound growth rate of more than 5% p.a. This growth creates an opportunity to generate significant long-term returns.

The trickle of law firms coming to the UK market is expected to turn into a flood. Watch this space.

Author: Nicola Foulston, CEO, Rosenblatt Group plc www.rosenblatt-law.co.uk

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Helping Young People Have an Understanding of Money We wrote last autumn about the launch of our initiative supporting the financial education of young people and our Young Person’s Guide to Money. This initiative is sponsored by some of our provider partners and supported by our audience of Financial Advisers who have visited their local school or college to deliver this initiative. The Young Person’s Guide to Money comes with a suite of presentation slides, aimed at providing a structured 45 minute session, easily delivered to teens aged between 16 and 18.

The launch of this initiative followed research we undertook in 2017 which showed that 97% of those who responded would be interested in becoming involved in financial education in schools, and so far we have delivered over 5,000 copies of the Guide through our volunteers. The campaign provides resources which include ways in which to make contact with schools, a set of PowerPoint slides and the ‘Young Person’s Guide to Money’; a publication designed to give young people a basic understanding of financial fundamentals which will assist them in the financial decision making throughout their lives.

The guide covers a wide range of areas including:

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better education about financial products and planning could make significant inroads into proactively tackling these issues, and ensuring a brighter financial future for the next generation.

Earnings and taxation

Mortgages

Budgeting

Saving money

Retirement planning

Investing money

Borrowing money

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One only has to look at the amount of debt and insufficient protection and savings provisions in the UK to understand the long-term issues that a lack of financial competency can cause, both to individuals and the economy as a whole.

Despite the inclusion of financial capability in the National Curriculum, schools continue to experience difficulty allocating time and space in the curriculum to deliver financial education.

According to a recent survey by Quilter, 77% of adults said they did not receive any financial education at school, but 98% feel financial education should be taught by schools, with 41% saying this should start in primary school.

for the significant work that has gone into your session today. We will put on our website and tweet also.“ Overall, all feedback received has been positive, and we would encourage anyone considering running a session like this at a local education centre, or perhaps for the children of their clients, to do it. We can provide all the material you will need, you can find it on the ‘future generations’ area of our website or by emailing info@nmba.info.

Author: Jennifer Parker, Head of NMBA

NMBA believe advisers are perfectly placed to www.nmba.info pick up the mantle of delivering this education, given their unique understanding which couples not only the technical aspects of financial advice, but also how to consider one’s circumstances holistically. We are very proud to be launching this programme to support young people and believe that better education about financial products and planning could make significant inroads into proactively tackling these issues, and ensuring a brighter financial future for the next generation.

NMBA attended a local school to deliver this content in August 2018, to a group of 120 17 year old students, and their Head of Sixth Mr Feeny sent the following feedback “Just a quick email to say another thanks to you, Tom and Jennifer for the talk today. Speaking to some students afterwards they found it to be a real eye opener and timing wise on the back of the day we had last week was perfect as we try our best to make sure the students make the right decision for their futures and manage what money they do have well!!”.

We were also delighted to hear from one of our members, Grant, who received some feedback following his attendance at one of his local colleges, “The session was very very interesting and you had pitched very well in terms of the age group; your examples towards the end were hugely valuable. Thank you again

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PIMFA, The Senior Managers and Certification Regime and You 2018 saw the greatest raft of regulation to land in our sector in the last 20 years and, over that period, PIMFA have assisted firms with their understanding of some of the most important industry developments in decades, from wrestling with the complexities of Brexit to the implementation of and compliance with these various new regulations, such as the Markets in Financial Instruments Directive (MiFID II), the Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs), the General Data Protection Regulation (GDPR) and the upcoming Senior Managers and Certification Regime (SM&CR).

senior managers and individual responsibility.

The result was the creation of SM&CR which, for banks, building societies, credit unions and PRA-designated investment firms, has been in force since March 2016. However, from 9th December 2019, this Regime will be extended to cover all FCA solo-regulated financial services firms. It will also affect international firms where those firms have UK operations.

In describing the effect of SM&CR the FCA, in their Guide for FCA Solo-regulated Firms, state that

H M Treasury has estimated that 17,200 Investment Firms (including financial advisers, wealth managers, stockbrokers, securities and futures firms, asset managers and family offices) will be affected. This will impact on From this background, 2019 will provide its own 106,000 Approved Persons, 43,900 future complex challenges, from the inevitable fallout Senior Managers and 62,000 certified persons, from whichever type of Brexit is eventually many of whom will be in PIMFA members. achieved, through the debate over the efficacy That’s a lot of people. This is ranked alongside of the regulatory load, to the continued drive for MiFID II and PRIIPs as one of the more innovation and diversity within our sector and comprehensive new regulations to land in our the rising threat of financial and cybercrime sector in recent times. to the economy, which is currently estimated to cost £27 billion annually. In terms of new Several recent research studies, not least industry development, the regulation to watch PIMFA’s own Millennial Forum, now renamed for is the Senior Managers & Certification the Under 40 Forum, have revealed a need to Regime (SM&CR). ‘futureproof’ our industry, particularly amongst the younger generations. This next cohort of The main aim of this regime is the reduction investors will soon be the recipients of the largest of harm to investors and the strengthening of transfer of wealth in history and it behoves us market integrity by raising the standards of to ensure that our sector is robust and reliable conduct for everyone who works in financial enough to cater to their changing needs and services, and by making senior people in firms differing priorities. SM&CR seeks to address more responsible and accountable for their this by raising the standards of governance, conduct, actions and competence. The regime increasing individual accountability, particularly shifts the responsibility of activities within a firm at senior management level, ensuring that firms onto senior managers and brings into scope and individuals clearly understand and can Non-Executive Directors (NEDs) as well, to sit demonstrate where their responsibility lies. alongside the responsibility of the firm overall.

“a key feature of the SM&CR is to reinforce that firms need to take responsibility for their staff being fit and proper to do their jobs. This requirement also applies to NonExecutive Directors who are not Senior Managers, except in Limited Scope firms. Once someone is in such a role, firms must assess them on an ongoing basis, and at least once a year.”

Following the parliamentary review of the financial services sector resulting from the 2008 financial crisis, the UK government looked to replace the existing UK Approved Persons Regime with one more focused on

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In order to assist our members, we have published The Senior Managers and Certification Regime PIMFA Guide. This will help in both understanding and complying with the regime and highlights several factors which firms will need to consider as they establish an SM&CR project plan. These include;

Firms will also need to ensure that employees’ training needs are assessed at the outset and at regular intervals thereafter and will need to periodically review the quality and effectiveness of this training. The FCA has a dedicated website on recruitment, training and supervising with examples of good practice, which include;

Having a recruitment process in place to ensure that a given individual is suitable for the designated role

Establishing a project owner who is part of the firm’s governing body

Clearly establishing roles and responsibilities and documenting them

The reporting lines within the project team should be clear and regular reports should be made to the governing body on the progress of the project

Putting in place an appropriate initial training plan Throughout the duration of the project, actions and decisions should be clearly documented and actions monitored to completion

This is a regulation designed to raise the standards of conduct for everyone who works in financial services and will help to rebuild trust and confidence in the sector. It also provides a singular opportunity to enhance the drive towards a more diverse sector by using the evaluation processes inherent within the regulation to widen the recruitment base.

SM&CR is a business issue impacting, in varying degrees, on most staff across the firm – it cannot be treated simply as a compliance or HR issue. An efficient and successful implementation will involve staff from across the firm

The value of the sector is not in doubt – in 2017 it contributed £119 billion to the UK economy, equating to 6.5% of total economic output and paid over £25 billion in tax. With this new approach to responsibility, accountability and diversity, leading to more trust, there is no reason to suppose that more clients will not flock to the sector in the years to come and avail themselves of the peace of mind to be gained from working with a qualified and sympathetic adviser to set attainable financial goals and achieve them.

Implementing SM&CR may require extensive discussions with staff members. Ensuring such discussions take place in a timely manner is important so that the SM&CR deadlines are met. Feedback from banks suggest that they originally underestimated the amount of time needed to identify Senior Management Representatives and agree with them their responsibilities and the level of engagement needed with other staff.

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Older workers represent huge talent pool for employers The recent UK Labour Market statistics1 showed the number of people in employment continues to rise. This is also the case for people over traditional retirement ages with the figures showing there were 1.2m people over the age of 65 in employment between April and June 2018. This is up from 1.1m in the same period last year2.

1.2M NUMBER OF PEOPLE OVER THE AGE OF 65 AND STILL WORKING

1.1M

2018

2017

On the face of it these figures may seem to be indicative of the whole “work until you drop” idea whereby people have to keep working because they haven’t saved enough for retirement. While this may be the case in some instances it’s also worth noting that many people choose to work longer out of choice.

This is an important shift that employers should take advantage of, and have plans in place for. Some people simply don’t feel ready to retire at the age of 65 and if they’re enthusiastic and continuing to do a good job then why should they? Of course, some people may no longer want to, or be able to do their job by the time they reach retirement age. In either case, you might find it helpful to speak to a financial adviser about plans for your employees’ retirement ages. http://employer.royallondon.com/pension-matters/2018/older-workers-represent-huge-talent-pool-for-employers

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Starting the conversation earlier

It’s important that employers make sure their older workers are aware that if it suits them and you then they have the option to work for longer. Such conversations could happen a few years away from normal retirement age while the employee is still assessing their options.

Another important point could be around the time retirement engagement packs are being sent out – these packs give the employee information of how much they have saved into their pension and gives them information about what their income options might be.

While these packs are often issued a few months away from retirement, at Royal London we recently decided to start sending retirement engagement packs five years from retirement.

Having these discussions at this point would also have the benefit of alerting those people who may not want to continue working past their normal retirement date to the fact they may have gaps in their retirement saving that need to be filled.

Older workers can have much to offer in terms of their skills and experience and it is important that employers recognise this. By doing so they have a huge talent pool at their disposal to help them continue to grow their businesses.

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Find out more Find out more on our new suite of retirement communications sources: 1. ONS Wealth and Assets survey: August 2018 2. Department for work and pensions, Automatic Enrolment Review 2017: Maintaining the momentum: December 2018 Author: Helen Morrissey, Corporate PR Specialist – Long Term Savings, Royal London www.royallondon.com

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FORTHCOMING EVENTS CYBER RESILIENCE CONFERENCE 21 May 2019 London

WOMEN IN WEALTH NETWORKING BREAKFAST 4 June 2019 London

COMPLIANCE CONFERENCE 18 June 2019 London

SUMMER NETWORKING RECEPTION 19 June 2019 London

ANNUAL SUMMIT 2019 16 October 2019 London

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Our Mission

What Do I Get For PIMFA Membership

Our mission is to create an optimal operating environment so that our member firms can focus on delivering the best service to clients, providing responsible stewardship for their longterm savings and investments.

What We Do

Influence

Participation

Events

PIMFA engages with and lobbies policymakers to develop an appropriate regulatory framework, thus creating an optimal operating environment for our member firms

PIMFA members can actively engage in several committees and working parties that cover key topics including Regulation, Retail Markets, Financial Crime and Taxation

PIMFA members can attend over 60 events per year, including CPD seminars and Webinars, Regional Briefings, Technical Conferences and the flagship Annual Summit

Represent the diverse range of firms in the investment and financial advice industry with a unified voice

Be the undisputed industry thought leader, consolidating our extensive technical insights and expertise in research and policy work

Access

Assistance

PIMFA members have full access to briefing documents and other guidance notes in the Members Area, as well as to data relating to the MSCI Private Investor Indices Series

PIMFA offers expert and confidential guidance on the myriad regulatory, policy and compliance challenges faced by the industry through our inhouse Regulatory, Policy and Research teams

Member Directory Improve your firm’s visibility by featuring in PIMFA’s member directory, with attracted more than 73,000 visits in the last year alone, and list your events in our industry pages

Lead the debate on policy and regulatory recommendations to ensure an optimal operating environment for firms and clients, maintaining the UK’s position as a leading global centre of excellence

Through our advocacy work, we promote the industry as a key catalyst to develop a culture of savings and investment in the UK

Network

Information

PIMFA provides an industry platform for members to engage with peers through our wealth of social and promotional activities, including our Women in Wealth event series

Members can stay updated via PIMFA’s publications including the fortnightly Bulletin e-newsletter, technical bulletin Update, in-house magazine Journal, and other research

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For more on members benefits or to become a PIMFA memeber visit us at: www.pimfa.com or email: membership@pimfa.co.uk

Promote a greater understanding of the sector and its role as a beneficial force in transforming the way people save and invest for the future

Facilitate dialogue across industry stakeholders, whilst developing bestpractice guidance

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The Personal Investment Management & Financial Advice Association

6 PILLARS Enabling Access

Supervision and Regulation

The Future Sector

Robust and thriving Markets

Business Protection

Digital business transformation

ISO27001 accredited information security system Expertise from our dedicated ISACA certified Information Security team Extensive encryption and cyber threat prevention systems deployed across our infrastructure ◆◆ The benefits of using the sector ◆◆ Improving Financial Education ◆◆ Promote a culture of savings and investment through targeted public policy activity

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◆◆ Emerging postBrexit rulebook ◆◆ Building Trust ◆◆ Inter-generational wealth ◆◆ Future Employees, Future Skills skills foresight, careers, apprenticeships, T- levels, diversity and inclusion ◆◆ Financial crime including fraud prevention

◆◆ Accumulation of Regulation ◆◆ Costs of Regulation ◆◆ Financial Services Compensation Scheme (FSCS) ◆◆ Financial Advice Market Review (FAMR) ◆◆ Financial Ombudsman Service (FOS)

◆◆ Retail investment ◆◆ Data protection including cyber in markets resilience ◆◆ Share owner ◆◆ Internet democracy standards and ◆◆ Engaging the security public ◆◆ Improving understanding of risk and listed products

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◆◆ Digital Strategy ◆◆ Understanding consumer view points ◆◆ Innovation

Exemplary cyber security track record Multi-channel communications

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The Personal Investment Management & Financial Advice Association

Would you like to contribute an article?

Alongside updates from PIMFA, the Journal includes several useful inputs from our associate member firms. These articles are an excellent opportunity to gain interesting insights into the wider industry and to learn more about PIMFA associate members. If you are an associate member who is interested in contributing to future editions of the Journal then please contact: Richard Adler, Director of Strategic Partnerships (richarda@pimfa.co.uk) or Sheena Gillett, Head of PR & Communications (sheenag@pimfa.co.uk) Journal design by Cicero Printed by Paragon