Tag Archives: SM&CR

Training and competence

Training and Competence: what Sir Alex Ferguson can teach us

Training and Competence (T&C) hasn’t changed much over the years. So when Harvard Business Review announced that it had distilled the ex-Manchester United boss Sir Alex Ferguson’s success into 8 key themes, I was interested.  After all, what was it about him that made his footballing record second to none? What can T&C learn from him?

What struck me about Ferguson is that he never set out to create just a great team – he set out build a successful club. In our world, the equivalent message is it’s not about just being good at T&C, it’s about building a business by making staff more professional and the business more effective.

I’ll take the first four of these eight ‘leadership lessons’ in part 1 of this blog and provide an alternative view on Training and Competence.  

1. Start with the foundation

Ferguson’s message: Start at the bottom and get future talent in place that enable you to build not only a future team, but the future club.

The message for T&C: Central to what Ferguson did was development, development and more development. Part of this story is about bringing in new blood. In our world, the growing status of para-planners should provide a career path for those that aspire to becoming professional advisers. For sure, he was able to attract young talent by using the name of Manchester United but it would also be doing him a disservice to say that this was the whole story. Along with raw talent, he insisted that there was investment in an academy and in the right sort of coaching staff. Arguably, the most impressive lesson we can learn from Sir Alex is how he was able to consistently get the most from the existing players and drive standards up. More about this in point 2.

2. Dare to rebuild your team 

Ferguson’s message: he assembled five league-winning squads whilst continuing to win trophies. He identified that the life-cycle of a successful team lasts four years.

The message for T&C: Be strategic. What does your business need from staff within the next one to four years? For example, what skills and knowledge areas will the business need? What would help us to be even better at what we do? This might involve bringing in new talent; often, it will need more from the existing experienced staff.  If a firm is to be effective, sitting still is not an option.

T&C should stretch existing staff. He created a positive culture; one that set an expectation and said that you should never put a ceiling on development. It is the role of Training and Competence is to see people as they could become, not as they are.

3. Set high standards – and hold everyone to them

Ferguson’s message: It’s as much about instilling values in players is it is about technical skills. Ensure everyone wants to do things better, work hard and never gives up. In other words, make them winners.

The message for T&C: You get what you measure. But as most firms measure compliance and not competence, are we truly focusing on the client and in the process, making the business more effective? With the Senior Management and Certification Regime (SM&CR), competence is now a business-wide issue – just about everyone has to be competent and be able to prove it.

You can simply illustrate this as follows:

From this, it is clear that you can be compliant, without being competent. Equally, competence is something that goes well beyond being compliant. So if we did genuinely re-balance T&C to focus on competence, we’d measure things like: client satisfaction, adviser behaviours, relationship skills and business results. When we just measure compliance – which admittedly is easier to do – we look at areas such as persistency, complaints and range of advice. For example with a compliance-focused approach, a client observation form will typically record the adviser’s adherence to FCA rules, not a coaching tool that focuses on the actual client experience.

From a business perspective, if we want winners, we need to focus more on what really matters.

4. Never, ever cede control

Ferguson’s message: The manager cannot be controlled by the players. If certain players are affecting the dressing-room atmosphere, you have to change this or cut the cord. If you want to maintain high standards, you need to take swift action when these aren’t followed. 

The message for T&C: Sometimes, you have to make tough decisions. As in football, sometimes there are people who like to think that the rules don’t apply to them. More generally, T&C contributes to the wider culture within the business. The more people see that Training and Competence is about development and not just monitoring, the more T&C is seen as being relevant. More buy-in reduces frustration and the scope for discord.

Read part two of this blog, click here.

Access the FCA Training and Competence rules, click here.

To find out how we can help you audit your Training and Competence arrangements or make them more effective, click here.

Remember, T&C doesn’t have to be boring.

Ian Patterson, T&C specialist and author of the CII’s J07 (Supervision in a Regulated Environment) and AF6 (Senior Management and Supervision) study texts.


T&C: what Sir Alex Ferguson can teach us (part 2)

In the first part of this blog, we looked at the first four of the leadership lessons of Sir Alex Ferguson. Here, we’ll look at the remaining four points. All of these are intended to help you to think differently about how Training and Competence (T&C) can help you and your business.

And of course, in the world of SM&CR, competence is a business-wide issue that applies to senior managers, certificated staff and advisers alike. All of these lessons can be applied to how you develop and manage staff across your business.

To read part one, click here.

5. Match the message to the moment

Ferguson’s message: ‘Few people get better with critcism; most respond to encouragement instead so i tried to give encouragement when i could. Well done. Those are the best two words ever invented’.

The message for T&C: Ferguson was talking about looking to emphasis the positives wherever possible and this works as much in business as it does on a football pitch. How often in financial services do you only hear from the supervisor when something has gone wrong?

Of course, as someone for whose actions brought us the expression ‘the hairdrier treatment’, you always have to be prepared to choose the appropriate response.  But don’t have this set as your default position. Catch people doing things right, not wrong.

6. Prepare to win

Ferguson’s message: Manchester United were famous for pulling results out of the hat, usually in extra time. Was it a fluke or was it, perhaps, the training sessions he ran where they practiced what the team tactics would be if they needed a goal with 10 minutes to play, 5 minutes or only 3 minutes remaining?

The message for T&C: I think there are several messages here. How often, for example, do we practice? In some businesses, being an adviser is a lonely existence in that rarely do they see other advisers in action. If so, how do they learn, benchmark themselves, pick-up tips – in other words, practice getting better? It is also easy for them to get into bad habits. Secondly, if we do practice, do we practice the really important things that help us to provide better advice, strengthen the relationship with the client or build trust more quickly? In the sporting world, peak performance starts with how we practice.

7. Rely on the power of observation

Ferguson’s message: The key is to delegate, trust people to do their job and to truly observe. The ability to see things is key.

The message for T&C:  To me, this isn’t the obvious point about observing client meetings. It’s more broad than this – the ability to stand back, to have good and meaningful information (KPIs), the trust that develops when people are allowed to get on with doing a good job, and just how important our diagnostic skills are. We all know that adding value to an experienced adviser is harder to do than with a new recruit. And so it should be. But this doesn’t mean it can’t be done – we just need to be smarter and sharper at identifying the two or three areas that could be performed even better or reinforcing the two or three areas the adviser does really well and would benefit from doing more often.   If we don’t have the right information and we don’t stand back, we’ll never be able to see how things could be better.

8. Never stop adapting

Ferguson’s message: in the 25 years Ferguson was at Manchester United, the professional game of football changed dramatically. From money, agents, team formations, GPS tracking and yoga, he saw the lot. His message, despite the success he enjoyed, was you can’t afford not to change.

The message for T&C: I’ll make two points. T&C as we know it, has been around for over 30 years so what do we do differently now? What does 30 years of progress in T&C look like? How have you adapted your professional development policies to incorporate the needs of SM&CR? Some T&C schemes look pretty much the same as they did in the last century. I find this sad, especially as financial services like football, has changed out of all recognition over this period. As a life-long fan of Bury FC, you’ll have to believe me on that one!!

To read about giving effective feedback, click here

Click here at how to deal with change

To find out how we can potentially help you with your T&C, click here

Ian Patterson, T&C specialist and author of the CII’s J07 (Supervision in a Regulated Environment) and AF6 (Senior Management and Supervision) study texts.

AF exam

SM&CR: the countdown begins

The Senior Management and Certification Regime (or SM&CR) will become part of everyday life for thousands of smaller regulated firms on the 10th December 2019. So, what’s it all about?  What is the impact of this likely to be? Read on to understand more about this important change; what it is and how you might be affected.

What is SM&CR?

After the dust settled on the Financial Crisis in 2008, the Government looked long and hard about what caused it to understand how such a melt-down could be avoided in the future. They concluded that the primary fault didn’t lie with regulation, but in a failure of the culture within authorised firms. In some cases, the actions and messages being communicated by senior managers undermined, rather than supported, good regulation and good business practice.

The result is SM&CR, also increasingly (and accurately) referred to as the ‘accountability regime’. This is designed to make the people who run authorised firms – of all types – personally responsible for their actions and for failings that lead to significant customer detriment. The intention is to put individual responsibility at the heart of how regulated firms conduct themselves. The banks and insurers have been subject to these requirements for over 2 1/2 years and on the 10th December 2019, it will also apply to all solo-regulated firms, i.e. FCA-only regulated firms.

The new rules will replace and expand the current approved persons regime. There are 3 key parts to the SM&CR:

  1. the Senior Managers Regime
  2. the Certification Regime
  3. Conduct Rules

Earlier this year, the Patterson Group conducted a survey that asked those preparing for SM&CR for their views. The results of this are shared with you to identify some of the likely key issues. It should also enable you to better understand what other smaller firms are thinking and how of people perceive the potential impact of SM&CR.

Click here and here for further details of SM&CR from the FCA website

Click here for the very useful CII SM&CR resource hub

Prepared for SM&CR?

This article was written on the 11th December 2018 so we know that SM&CR will be extended to all authorised firms in a years time. The next few months will be crucial in planning the implementation of this.  A year sounds like a long time but not when you look more deeply at what it entails.

SM&CR will apply to firms irrespective of size. 76% of those who responded worked for larger firms, 24% for medium sized firms and, interestingly, there were no responses from small firms.  This could  possibly indicate that their awareness of SM&CR is lower and they felt less able to comment on it.

Reassuringly, the survey found that most respondents felt senior management understood the key issues. A respectable 82% of respondents agreed or strongly agreed that management grasped the key issues; only 18% of respondents did not.  Many appeared to already be making plans for the introduction of SM&CR.

What will SM&CR cost?

We asked about the perceived expense of meeting SM&CR. Significantly, 65% believe that SM&CR will represent a significant cost to their business. This is broadly in line with what the existing banks and insurers have found. That said, these larger organisations already have many of the processes that are necessary such as performance management systems and appropriate record keeping. The costs for smaller firms – in terms of time and expense – may well be higher.

Finally, we asked respondents what they thought the three main challenges would be in introducing SM&CR in their firm.  Four key areas stood out:

  1. How to define the competence of people within the business and evidence this
  2. Communicating and educating staff about SM&CR
  3. Allocating prescribed responsibilities
  4. Defining who is covered by the ‘significant harm’ function

It was slightly surprising that record keeping and the lack of money or resource didn’t feature more highly. Whether this turns out to be the  case (or misplaced optimism), we’ll have to wait and see.


SM&CR is intended to strengthening consumer protection by increasing the personal accountability of staff across the organisation and through strengthened governance processes.  Whatever the potential benefits, it’s clear that many firms expect SM&CR to come at a cost. The research flags up four areas that are most likely to challenge firms. Overall, the research suggests a generally positive picture but with work still to do.   Time will tell.

Click here for details of our services.

Ian Patterson

Founder of The Patterson Group and author of the CII’s AF6 study text on Senior Management and Supervision, and J07 study text Supervision in a Regulated Environment.


Senior Management and Certification Regime

Why should you be interested in the Senior Management and Certification Regime?

If you run an investment advice business, mortgage, wealth management firm, or just about any other type of FCA authorised firm, the Senior Management & Certification regime (SM&CR) will apply to you. It is now expected to be introduced on the 9th December 2019.

Some estimates suggest that SM&CR may result in a 20-fold increase in managers with personal regulatory responsibility, from 3,000 in 2016 to 72,000 in 2019.

In this blog, I will look at the key changes and what you can do to prepare now for it’s introduction.

What is the SM&CR?

To answer this, i have to go back in time a little. In March 2016, the FCA rolled out a similar regime to the large banks and insurers. This was inspired by the Credit Crisis and the attitude of regulators in the USA who have taken the lead in making senior managers responsible for their actions. In this country, too often senior managers have been able to hide behind corporate ‘collective responsibility’ with the result that rarely have individual’s been hauled over the coals for their actions – however badly these have impacted on consumers. Take RBS and it’s take over of ABN Amro, for example.  Insurers will come into the SM&CR regime in December 2108 and all the remaining 46,000 or so authorised firms will be subject to it by Q4 2019 (subject to Treasury approval).

SM&CR has (despite its name) three elements:
1. The Senior management regime – which broadly applies to those that currently hold a control functions because they are in a governance role within the authorised firm, e.g. CF1, CF3, CF10; and

2.The Certification regime – these are managers who are lower down the corporate ladder but who still, through their actions, could have a significant adverse impact on consumers. So the head of HR, Operations and the IT chief could be covered by this; and

3. Conduct rules. These are a beefed up version of the ‘Statements of Principle and Code of Practice for Approved Persons’ – but these new conduct rules will apply to just about every person in an authorised firm and not just the current relatively limited number of approved persons.

In other words, SM&CR will cover a much wider and larger population than the current approved persons regime (APER) but the numbers of people who are directly approved by the FCA is likely to reduce.

What’s the point of SM&CR?

SM&CR has two main aims:
1. Make senior managers and other staff more responsible for their actions and improve behaviours; and
2. To clarify and reinforce governance structures in all authorised firms.

What will change?

For full details, you will need to read the FCA’s consultation paper CP17/25 (or at least the executive summary). Click here for the link. If reading 392 pages is akin to a near death experience, here’s a synopsis of the important bits that will apply to ‘core firms’.

Here are the 7 things you need to know:
Senior management regime

1. The approved persons regime (as we know it) will be replaced. Only those individuals performing senior manager functions (SMFs) will be approved by the FCA in the new world, e.g. chair, chief executive, compliance oversight, and prescribed functions (see point 4).

2. Every SMF will have a statement of responsibility. This sets out their role and what they are personally responsible for if they fail to take ‘reasonable steps’.

3. Every SMF must be signed-off as being suitable to carry out their role by the firm at least annually.

4. Prescribed responsibilities. The FCA has identified six new roles that must be allocated to individual senior managers. These include oversight of the SM&CR, and the firms policy and procedures for fighting financial crime.

Certification regime

5. Most other managers are likely to be covered by the certification regime if they perform a ‘significant harm function’. This means that someone in their role could cause harm to the firm, customers or both. This is likely to cover any significant management function not covered by the senior management regime. For the first time, anyone that supervisors a ‘material risk taker’ such as any type of adviser, will also have personal responsibility under the Certification Regime. This part of the regime will also include existing CF30 roles. Under SM&CR, these will be ‘certified’ by the firm in the future instead of being authorised by the FCA.

6. Everyone covered by the Certification Regime, like senior managers, will need to be certified by the firm once a year that they are competent in the role. It is the firm that undertakes this. This includes conducting fit and proper checks at outset and annually.

Conduct rules

7. All staff in an authorised firm will be subject to new individual conduct rules except ancilliary staff, e.g. cleaners, receptionists. So para-planners, compliance and administration staff would be covered by conduct rules for the first time. The rules include wide ranging obligations, e.g. the need to ‘act with integrity’ and ‘pay due regard to the interests of customers and treat them fairly’. This will replace the current ‘Statements of Principle and Code of Practice for Approved Persons’ that currently only apply to just controlled functions. It will also dramatically broaden the number of staff covered by any sort of conduct requirements for the first time.

The very largest firms will be regarded by the FCA as ‘enhanced firms’. In addition to all of the above, they must also have responsibility maps (that show how responsibilities are allocated) and they will also be subject to handover requirements. Under these, a senior manager will need to sign to accept the role responsibilities. A successor with then sign to acknowledge that they are responsible from a given date. This is NOT a requirement for smaller firms, reflecting the FCA’s proportional approach to the wider roll-out of SM&CR.

We anticipate that existing approved persons will be grandfathered into the new SM&CR.

What should I be doing now?

Please remember that this a consultation document and things may be refined. Having said that, don’t pin too many hopes on anything significant changing as these proposals are, by and large, already in place for the banks. Any change is likely to be minimal given the political appetite for change.

Here are 7 steps to take now:
1. Determine which regime your people will be subject to.

2. Statements of responsibility. Start consulting and drafting these now as these should be clear and explicit. All senior management functions (SMF) will require one as will the FCA approval of any new SMR position.

3.Build value statements or conduct statements that are appropriate for your business and your clients. Measuring ‘conduct’ is a whole lot harder than assessing knowledge and will take time and thought to produce.

4. Train supervisors of mortgage, protection and general insurance advisers. Chances are they won’t have previously been trained to the same levels as those that supervise investment advisers.

5. Decide what training will be required – particularly for SMRs performing the prescribed roles and those who will be covered by the certification requirements. There is also a FCA obligation to train them so they understand how the rules apply to them.

6. Look at existing systems and procedures (such as the appraisal system and T&C) to see how they can be amended to support the  Certification requirements, e.g. the annual certification requirements and the subsequent notification of anyone who does not meet these requirements.

7. Determine which SMF(s) should pick-up the six new prescribed roles.

With best wishes

Ian Patterson

For details of how we might be able to help, click here

Related articles:
T&C Culture.  Click here 

Senior manager competence: getting it on the agenda. Click here