Tag Archives: FCA supervision

FCA T&C supervisor

FCA T&C Supervisor: what you need to know

This article answers the five key questions we get asked about being a FCA T&C supervisor.

Rules on Training and Competence (T&C) have been around since 1993 – over 25 years ago – so there isn’t anything particularly new about T&C. That said, there are still plenty of myths and misunderstandings about what it is, and why is it important.

Before I start, let me just share with you something I was told many years ago by a regulator. They said: “T&C is only as good as its supervisors”. To this day, nothing could be more true.

1. Who needs to be FCA T&C supervisor?

First of all, let’s accept that the term ‘supervisor’ is widely used everywhere as a generic description for a people manager. Under the FCA T&C rules, however, this is a specific regulatory expression which has specific FCA rules that need to be met (see the next section).

In simple terms, anyone who provides advice needs to be supervised. So a retail investment adviser, mortgage adviser or general insurance adviser (e.g. those that advise on protection policies) must have a supervisor under FCA T&C rules. If you don’t supervise these three roles (or some specific back-office roles that you’ll usually only fine in a product provider or fund manager), then you aren’t a ‘supervisor’ under FCA T&C rules. Simple.

But what about anyone who ‘manages’ para-planners? They are not a T&C supervisor but under the Senior Managers and Certification Regime (SM&CR), anyone performing a ‘significant harm function’ does need to be supervised. If your business defines a para-planner as a ‘significant harm function’, then they must have a supervisor. Similarly for MiFID firms, roles like para-planners will be classed as ‘information givers’.  They also need to be appropriately supervised unless classified as competent.

As a result, the population that needs to be ‘supervised’ under various FCA requirements is a lot bigger than just those that are subject to T&C. Many firms will also use the FCA T&C supervisor rules (see next section) as best practice for people who supervise these other roles, even if they don’t strictly need to.

Competence v compliance. Read more about why competence is now a firm-wide issue.

2. What are the FCA rules that apply to FCA T&C supervisors?

Under FCA rule 2.1.4, there are four things that a T&C supervisor must be able to do and be able to prove:

  1. Coaching skills. This isn’t defined anywhere so this could also include feedback skills. Click here for more information of what this might look like.
  2. Assessment skills. The ‘C’ in T&C stands for ‘Competence’ so this rule expects the supervisor to assess (or contribute to the assessment) of an individual’s competence.
  3. [Relevant] Technical knowledge. It’s difficult to assess what someone is saying is correct if you know nothing about the subject. As a result, supervisors are expected to have technical knowledge so they can identify inaccurate or misleading information.
  4. Level 4 Qualification. This is required where ‘trainees’ are being supervised. If the supervisor has a team of competent advisers, then this isn’t required under T&C rules, but is obviously desirable in many cases.

3. How do you prove a T&C supervisor is competent?

Most people will have heard the expression ‘if it isn’t written down, it didn’t happen’. So how do you prove that a T&C supervisor is competent?

Firstly, you need to know that the FCA rarely accepts the principle of ‘grandfathering’. If you are relying solely on 25 years of experience as a manager as your evidence that you are a competent T&C supervisor, then think again. Have you worked for a wide range of businesses in a leadership role? Nah, that won’t cut mustard either. You might have great skills and experience, but these in isolation can’t prove you are competent T&C supervisor.

So what do you have to do? I’ll look at this from two perspectives:

  1. On appointment as a FCA T&C supervisor. I’ve already looked at what the FCA rules require you to demonstrate. The difficulty for most is demonstrating the two skills – assessing and coaching. These could be evidenced in the workplace or by attending our in-house workshop – which is designed to do just that. It should be possible to evidence relevant technical knowledge easily enough using CPD and a level 4 qualification will be straightforward in that you either have it, or you don’t.
  2. Ongoing competence. If the FCA have gone to the effort of identifying two specific skills they expect supervisors to demonstrate before they supervise, sensibly the process would be repeated every 2-3 years to make sure these are still current. In my experience, however, rarely does this happen. There should be documentary evidence of the supervisors activities, e.g. observation aids, development plans etc and this helps to demonstrate their competence. In addition, CPD should include evidence of ongoing supervisory development. Some people will also take the CII’s J07 exam for supervisors. In short, a range of sensible CPD activities that relate to supervision should do the trick, along with a periodic re-assessment of their supervisory skills.

4. What should T&C supervision look like?

Supervision is likely to include a blend of different measures which include:

  • observations in the workplace
  • monitoring indirect evidence such as KPIs (key performance indicators)
  • file reviews
  • 1-2-1 meetings
  • agreeing CPD and activities which support and help develop staff

Click here for more details.

5. Does everyone need to be supervised the same way?

The short answer is ‘no’. In fact, it would be strange if they were. Different people need different levels of supervision. New advisers, or people who are inexperienced in a particular area, will need more support than more experienced colleagues who are familiar with their roles.

So an experienced adviser may only need supervising at a high level. For example, one client observation a year, quarterly reviews of KPIs, a 10% sample of standard advice files, and perhaps quarterly 1-2-1’s.

Effective T&C supervision, like any effective people management, is about following a process and treating everyone differently based upon their needs. Ask yourself ‘how can I most add value?’ and you shouldn’t go to far wrong.

Click here for more detail on T&C best practice.

I hope this provides some useful insights.

Ian Patterson (Author of the CII’s J07 study text, Supervision in a Regulated Environment)

For details of our in-house supervisor training, email me at info@pstgroup.co.uk

inclusive financial planning

FCA Supervisor training

This blog looks at how effective FCA Supervisor training can help your business. This isn’t a topic that excites many people – but it should! If you want to get the best out of your people and your business, then read on. This is something you need to get right.

Client best interests

The FCA had planned to review the post-RDR advice process in 2020 (although COVID and Brexit and a few other things have got in the way).  This is all about evidencing whether the FCA’s objectives have been met and identifying any gaps that are still work in progress.  To date, comments from the FCA have been largely supportive of the changes introduced by RDR. But as ever, regulation continues to evolve its thinking.

To date, the FCA has shown little appetite to operate as a ‘price regulator’. It has the power to impose a price cap but, with a few exceptions, it’s chosen largely not to do so. That said, expressions such as “costs” and “value for money” are increasingly being used by the FCA.  Importantly, it has indicated that costs will also form part of next year’s post-RDR review.

And it’s not just the regulator. Many advisory firms will also have first hand experience of clients who query what their services cost them. Perhaps MiFID has contributed to this or maybe some clients are just becoming more curious about how businesses earn their fees.

Either way, the writing appears to be on the wall.  Some fund managers have reduced their costs whilst advice charges appear, overall, to have steadily risen across the market over the last few years.  Advice firms may come under pressure to reduce their fees, offer clients more, or become better at demonstrating the value of what they provide to clients.  Most businesses would probably prefer the latter, but how?

Effective supervisor training

There are a number of ways to communicate ‘value’ to a client. In this article, I’ll focus on the role that supervision can play. Forget about just giving a ‘tick in the box’, I mean proper effective supervision. This starts with having meaningful processes and documentation as part of a T&C scheme.

Many firms I work with use documentation that  first saw the light of day 10 or 20 years ago. It might have moved on a little – the odd tweak here or there – but the trained eye can still spot bits that were first introduced by the PIA!  For example, it hasn’t been a regulatory requirement for retail investment advisers to hand over a business card to new clients for over 10 years now. So why do I still often see this as a mandatory area that advisers are expected to demonstrate? A clearer focus on what is actually relevant for a business would be beneficial.

Let me give you another example. Does the observation aid you use focus on monitoring the process that the adviser follows, or the experience the client receives? There’s probably a 99% chance it’s the former. In reality, most observation forms set out the process the adviser must follow so that the FCA Conduct of Business rules can be evidenced. This is very understandable from a compliance point of view, but it doesn’t help to embed the relationship-focused adviser skills that clients increasingly expect.

Supervision can only add value if:

  1. The tools we use, i.e. observation aids, are fit for purpose and reflect what we are trying to achieve, and
  2.  Our people managers (or supervisors) are able to use them skilfully.

It’s all about the relationship

So to summarise, many firms use a T&C observation form that is out of date and is little more than a compliance check list.  I started this article by suggesting that ‘value for money’ will come under greater scrutiny from both the FCA and clients who increasingly expect more. The question is whether our processes (such as observation aids) and our supervisors are up to the task of delivering what the client will increasingly expect from us in the future. From what I see, the profession does provide a great service to clients; its a matter of how much the client values and recognises this. The key element of this is the relationship the adviser has with the client.

Developing the relationship skills of our client-facing staff should be a business priority. How we communicate the value we provide should be a priority. Developing the skills of our supervisors should be a priority. If we do this, ‘cost’ becomes less of an issue because our value to our clients is clear for all to see.

Click here to access a 21st Century T&C coaching tool

Click here for details of our in-house supervisor training

Click here for the CityWire report

Supervising financial advisers

Supervising financial advisers- recording client meetings

This week, the FCA published its policy statement on the forthcoming Markets in Financial Instruments Directive II (or MiFID II) requirements. These come into force on the 3rd January 2018 and may have a profound impact on some regulated firms.  The details around what I’m talking about here are to be found in section 19 of the policy statement. It is clear that they will potentially have a profound impact on supervising financial advisers.

The FCA’s view

Although it will introduce a wide range of changes, the change that is creating much of a stir at the moment is the recording of client conversations. When I say this, the rules refer to telephone conversations and not face-to face conversations. We’re also only talking about conversations with clients that include giving the client advice.

As an alternative to this, firms that are affected by this will be able to write ‘analogous notes’. Really?! The document makes this clear that these should not only capture the substantive points of any conversation such as the time and date, and who initiated the call. They should also include the ‘context and colour to the decision made by the client’.  It’s clear that record keeping will have to go well beyond just recording the facts, but also the client’s motives.

Supervising financial advisers – best practice

So what has recording client meetings got to do with supervising financial advisers? One of the trends of the last few years has been the growing number of adviser firms who already record client meetings. And when I say this, I mean face-to-face meetings and not just telephone discussions. For every firm that does this, there are probably another nine who would look at this with a sense of dread. You can understand some of the concerns; client’s won’t like it, it will encourage complaints, what about the costs?

On the other hand, if you talk to some of these firms, they find the vast majority of clients agree to the recording. In practice, most clients seem to be comfortable with the process. Maybe it gives them reassurance.  Whatever the reason, if it doesn’t impact on the client experience, then maybe it’s worth considering. And when I say this, I mean it’s worth considering for supervising financial advisers’ face-to-face meetings. This goes beyond what the FCA is proposing to introduce.

What’s in it for the authorised firm?

  • There are so many low-cost electronic recording and transcription systems available now, the extra cost should be minimal. Some firms even use transcriptions as part of their formal documentation which demonstrates ‘know your customer’.
  • Clients seem to like it, if it is presented positively.
  • It should minimise spurious complaints, you know the “you said, I said” type of situation. I know several of the firms who have already adopted this have also secured substantial savings on their PI insurance (or at least had their excess reduced).
  •  From a T&C point of view, it’s a godsend when supervising advisers. Just think, as a supervisor you can dip into any client meeting and listen to it. There’s no danger that the adviser will be on their best behaviour just because you are sitting in the room observing them. You don’t have to go through the time consuming process of observing them. You can just focus on the parts of the recording that interest you the most, e.g. exploring the client’s objectives and concerns, or the adviser’s explanation of a particular product or service.

The FCA might want to make this approach compulsory, but there are some firms who already go well beyond the FCA requirements – and do so because they believe it’s good for their business. Food for thought.

FCA supervisor training

Supervisor training and advice suitability

A key question for any T&C supervisor is this: do our advisers provide suitable advice to our clients?  Most supervisors would say that they do – but  if your advisers weren’t providing suitable advice, how would you know? One way to do so is to observe them and do some supervisor training.

In my world, the role of the T&C supervisor is twofold:

  1. to ensure that minimum regulatory standards are met, and
  2.  to improve either the quality or quantity of advice provided to clients.

FCA – Assessing suitability review – May 2017

To achieve these two aims, we need to be clear about the FCA expects from us. In their review published in May 2017 (click here for the full report), they gave a clear steer about what is working, and what isn’t.  Either way, if you act as a supervisor, this is essential reading.

First the good news. 91.3% of investment advice was found to be suitable. This is a huge increase on previous reviews and a credit to the increasing standards we see across the profession. It’s still not perfect, but it’s pretty good.

The less good news is that 4.3% of advice was deemed ‘unsuitable’. There were also some concerns around disclosure. The FCA defined this as being the firm’s initial disclosure, the product disclosure and the disclosure in the suitability report.  Here, 41.7% of cases showed that the FCA COBS disclosure requirements hadn’t been met.

The main areas to be addressed by supervisor training relate to the disclosure of fees – both initial and ongoing fees. Then there were fee-charging structures that are so broad, they are almost meaningless. Firms that charge advice on an hourly basis were also failing to provide an overall indicative cost for it.

Supervisor training – what to focus on

  1. The explanation of costs is clearly still an issue across regulated firms. In the work I do, I also see advisers who always offer a discount on the standard fee tariff (did you know that these should be recorded on an exception report?). I also see advisers who do not believe that the service they provide is worth what they are asking the client to pay.
  2. Although the FCA review gives some reassurance as to the suitability of advice, i wonder if we are just getting better than we were at giving a product solution, and then justifying it to the client.  If i’m right, then many advisers are still focusing too much on product solutions, and too little on first establishing the needs of the client. This sounds like I’m being pedantic but to me, it’s quite significant. If we are to provide suitable advice, we need first to have a clear idea about what is really important to the client, what their priorities are, what they would like, when and how much, and what could stop them form achieving this? If advisers in your business are talking about investments, pensions or whatever within the first few minutes of meeting with a client, then their focus is very much on solutions and not on the client’s needs.


The points I’ve just made are all likely to have a negative impact on one or more of the following: the client relationship, the quality of the information collected, the adviser’s ability to demonstrate how the advice meets the client’s needs, and/or the range of client priorities that are identified. At a time when the FCA is talking more about advisers providing ‘value for money’, these are all important factors.

So to finish. If we go back to the FCA findings, we’re clearly getting better at documenting the advice our financial advisers give. The most effective way to counter this is supervisor training that focuses on observing advisers to monitor and develop the broader areas we’ve discussed. A more ‘client-first’ approach is the foundation to any long-term effective and mutually beneficial client relationship.