How the Senior Management and Certification Regime affect recruitment?

​Here's what you need to know...

Change is afoot in the financial services world. Quite apart from the impending political change of Brexit, or the advance of technology, this January the Financial Conduct Authority unveiled their new set of rules that are due to impact the sector: The Senior Management and Certification Regime (or SMCR). Due to come into effect across the insurance sector on the10th December 2018, and the Financial sector in early 2019, the rules are likely to have a massive effect on the way in which financial firms do business, manage their team- and even the way they implement their company culture.

With the Financial Services sector contributing6.5% of the UK’s total economic output, any changes to the way in which it’s run should be turning heads. Indeed, the ripples of the SMCR are already being felt across the financial services sector, especially in the roles that are starting to come into demand at recruitment consultancies. 

Here’s what you need to know. 

What is the SMCR?

At its most basic, the SMCR is a new set of FCA guidelines being introduced by the industry regulators. Replacing the current Approved Persons Regime, it aims to reduce harm to consumers andraise professional standardsacross the industry, by creating a system where people can be held to account more easily.Published following a consultationlast year, the regime will require every professional who works in senior management to be approved by the FCA, whilst employees whose work means they handle sensitive client information and assets will be periodically reviewed.

Under the new guidelines, allocating responsibility is key. Under seven prescribed ‘responsibilities’ in the document, the SMCR encourages staff to take personal responsibility for their actions, and for firms to allocate responsibility for certain jobs, so that both organisations and staff members can thrive in the roles for which they are best suited.

How will it impact the industry?

It will certainly cause a sea change in the way businesses are structured and run. Under the SMCR, senior managers will become completely responsible for their team, which will ensure that they are more tightly regulated; all senior managers will be required to set out a list of ‘Statements of Responsibility’, creating a set of guidelines by which they are expected to adhere. These will set out the responsibilities and requirements of their role, which can then be accessed by anybody in the business and hold them accountable.

Furthermore, in order to create a system where the right people can thrive in the right job, roles which operate across multiple areas of the business - such as that of the Compliance Director- will be split up into constituent jobs where specialists will take charge of the departments they can manage most effectively. As a result, a Head of Compliance who holds CF10 and CF11 control functions would end up splitting this to either be a Compliance Director with CF10 or a Money Laundering Reporting Officer with CF11. The FCA hopes that this will enable finance professionals to concentrate more fully on their own specialist area, thereby theoretically reducing the risk for the customer and improving the overall service. 

It’s not just the way in which firms do business that will change either; company culture is high on the FCA’s list of priorities in implementing the SMCR, with senior managers tasked with driving it forwards and creating a positive and collaborative working atmosphere.

How it will affect recruitment?

Though90% of compliance professionals feel that there is sufficient expertise in their firm to implement these new regulations, the implementation of the SMCR still means that a lot of change is on the horizon. At IDEX Consulting, we’re already starting to see these changes, as companies put the relevant framework in place to prepare for the SCMR’s launch in late 2018. Managing directors, and those who are responsible for overseeing teams, will all need to be specialists in the areas that they are overseeing, such as investment, wealth, or terms and conditions. 

As a result, we’re seeing an increased demand for consultants to headhunt for specialist skillsets, as roles are divided up and different responsibilities allocated to different people.
To stay ahead of the curve, companies will need to engage with specialist agencies who know their market inside out, especially as the increased demand for certain roles will likely create a skills shortage. However, with professionals already starting to trickle into the market, often because they don’t believe that their company is doing enough to prepare for the new rules, it’s likely to be an exciting time for those within Financial Services, and for those looking to create a strong team that can thrive under the future regulations.

Looking ahead with IDEX Consulting

At IDEX Consulting, we look to the future so we can stay ahead of the curve, matching the most talented candidates from around the job market to the best upcoming jobs. It’s time to get started, browseour jobstoday.