Paraplanners and Investment Managers’ Assistants caught in SMCR ‘blindspot’

9 September 2019

Paraplanners investment managers' assistants SMCR

With just three months until the FCA’s Senior Managers Certification Regime (SMCR) is rolled out across financial planning and wealth management businesses, regulatory consultancy Bovill is warning of an emerging blindspot in firms’ approach to the certification process. The company is stressing the need to undertake thorough reviews of paraplanners and investment managers assistants’ functions if firms are to avoid failing to comply with the new regime.

According to the latest FCA guidance, individuals performing ‘client dealing’ functions must be part of the annual Certification process, unless they are in very basic administrative roles. This includes not only those who perform the regulated activities of advising, arranging or dealing in investments, but also those involved in contacting clients or arranging transactions – activities that paraplanners or assistants to investment managers are often involved in.

Neil Walkling, managing consultant at Bovill, said:

“We’ve been working with a number of financial planning and investment management firms to get them ready for SMCR by 9th of December. What we’re finding is that they have convinced themselves that paraplanners or investment managers’ assistants don’t need to be Certified, just because they are not the decision makers. This is a fallacy and a real SMCR blindspot.

“We urge firms to review the job descriptions of their paraplanners and investment managers’ assistants against the FCA’s ‘client dealing’ definition, and to challenge themselves with the following question: Are they junior administrative staff, performing simple tasks that don’t require any discretion, judgement or technical skill? In my experience this just isn’t a credible description of the job most of them do. These roles usually involve judgement and often high skill levels which can have a big influence on outcomes for clients. They need to be Certified.”

With estimates of up to 9,000 paraplanners alone working within financial planning companies[1], there is a good deal of work to be done to get the controls in place to Certify these staff.

Bovill is calling on firms to urgently identify staff who are involved in their advice or investment management process, and who need technical skill and judgement to perform their role. These individuals must be covered by a Training and Competence scheme, in order to obtain the evidence required for Certification purposes. On a practical level, companies should consider how client file suitability checks can test the contribution made towards the overall client outcome by any technical staff who are not advisers or investment managers.

Neil Walkling added:

“Depending on how clearly responsibilities are set out in your firm, gathering evidence to assess ongoing competence might not be easy. If you’ve not already worked out how to do this, now would be a good time to sit in a corner with your thinking cap on.”

 

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