WEALTH AND ASSET MANAGEMENT GOVERNANCE

By the time a crisis strikes, it is too late to start preparing.

Enhance your governance and show the regulator that you are on the right path.

Financial firms need to make sure that they are thinking about the financial consumer in terms of the outcomes from the product or service they are responsible for.  Then working backwards, the firm should consider how the service or product is being sold, managed, monitored and therefore created.  Are they all aligned to meet and achieve the customer outcomes (expectations)?

 

 

We keep firms and financial products, such as Collective Investment Schemes on the right side of regulation.

We empower, through training and management information, senior management and fund boards with the necessary oversight, due diligence and controls over their financial products and funds​. The main objective is to be able to sign-off “Good Customer Outcomes”.

We will help your company with the following:

  • Prevent issues from happening and implement key controls and processes around risks.

  • Keep on the right side of regulation and avoid attention from the FCA. 

  • Have a system in place to understand where conduct risks lie.

Governance Connect can clearly demonstrate a passion for the financial industry due to experience from a variety of roles: Working through a regulatory Section 166, Product Governance and managing Wealth on behalf of private clients and institutions.  

 

Therefore, Governance Connect has a very good working (practitioner) understanding of the wealth industry and FCA, in particular the regulatory expectations that firms should have implemented and the journey of change, for example as a response to the FCA’s work started in 2016 and concluded in 2019: the Asset Management Market Study.

We Will Help You To Avoid

 

  • Fines

  • Negative Firm Systematic Framework FCA review

  • Negative brand implications

  • Client restitution

    • By helping you develop Governance structures to reinforce client trust and investor protection to retain and win new business

FCA Lens

The FCA does not want to just see rules copied, but also to understand how firms have arrived at their systems and controls (SYSC) and how they Treat Customers Fairly (TCF). 

 

How does a firm show that it is monitoring financial products and value creating for money (value assessment)?

Case Study


As a recent example was a FCA’s Dear CEO letter (13th June 2019) to Wealth Management and Stockbroking firms setting out its view of the key risks of harm that firms could pose to their customers or the markets in which they operate, in particular:

  • By losing confidence in the industry’s ability to deliver their financial objectives due to mismanagement of conflicts of interest and market abuse;
What Governance Connect brings is a front office practitioner approach with a core understanding of Compliance, Risk, Audit and the Front Office Controls to pre-empt of help to solve the BAU issues that have already happened. Based on past experiences, a lot of solutions are around identification and controls. Equally, to set up key risk indicators and committees to monitor, have a holistic view of the business and help direct resources in the right way. Fund Governance allows Asset Managers to meet their obligations by ensuring
  • Funds are run by investment managers of appropriate standing and expertise;
  • The risks of any new fund are identified and can be effectively controlled;
  • Investors are aware and understand the risks of investing in individual funds;
  • Committees and functions are established to provide an additional level of oversight and control
Risk monitoring
  • Develop a list of key risk indicators for a risk committee
  • Track and report on incidents and complaints
  • Define and implement risk & control reporting
Asset Management Oversight
  • Operations
  • Compliance and Regulatory observance
  • Risk Management
  • Investment Performance and Investment Risk




Read More About FCA Lens


It is important to understand how the FCA reviews firms in terms of its Firm Systematic Framework (FSF) reviews, as part of its FCA supervision model. The FSF is designed to allow supervision to focus on key conduct risks in all types of firms. The FSF considers each conduct risk in context to the potential harm to consumers, as well as the impact a risk could have on the market. At the heart of the FSF, the FCA asks a simple question: “Are the interests of customers and market integrity at the heart of how the firm is run?” A FSF therefore assesses a firm’s business model, strategy, sales processes, post-sale, product design and governance culture. Please click on FCA Enforcement Action to understand the importance of a Governance Framework to avoid FCA focus




Why Use Governance Connect?


1. To offer training sessions on investment and fund governance for senior management and fund directors (fund boards).

2. To work on any single product or investment governance issue or management information; to give senior management and fund boards the necessary information for their fiduciary duties in terms of Investor Protection.

3. To help with any aspects on asset manager and fund due diligence

Quite simply Governance Connect is here to help firms avoid Conduct risks becoming Issues, funds being forced to Close, Fines and Client Restitution.

Governance Connect was formed to help firms to set up the appropriate Systems and Controls so as to avoid (conduct) risks emerging, which if not detected could turn into issues and a negative outcome for a client, the firm (brand) and the market (market abuse).

Governance Connect can work on single issues, but we would recommend that an asset manager goes through a full Due Diligence health check, that can help identify areas, departments, policies and procedures for enhancements to allow continued good “customer outcomes” and comply with SYSC 2 and SYSC 7 (Corporate Governance, Committees, Terms of Reference, Management Information).

If required, Governance Connect can work with firms to make sure that processes are in place; from having a functioning Risk Management Policy and a process in place to identify conduct risks before they become issues and the FCA starts knocking on the door.

All in all - to make sure the asset manager or Authorised Fund Manager is on the right side of regulation.

The Danger of Omitting to Review Internal Departments

By omitting to review departments, processes, systems, controls and culture can lead to Conduct Risks and poor customer, business and market outcomes. The knock-on effects are for the FCA to force firms to spend time and take resources away from positive business aspects to be used on:

  • Risks
  • Issues
  • Re-building the brand
  • Fire-fighting client retentions
  • Lost business and an inability to get new business
  • Breaches
  • Regulatory oversight, fines and censures
  • Products being suspended and closed
  • FCA direction to NOT undertake certain types of lucrative propositions
  • Costs, Time and Money affecting profitability and business viability

Who is Accountable for a Lack of Governance – the CEO?

Within your firm who is responsible for joining the dots up between the various oversight functions, such as Compliance, Risk, Audit, Management and the Board – to make sure that the above negative risks and dangers do not occur?

Governance Connect has been specifically set up on the back of a desire to help financial institutions and people:

  1. Create good customer outcomes
  2. Prove that their products and services can be audited in terms of value for money
  3. To keep the regulator and other oversight organisations at bay due to a good governance framework (member's page) and internal oversight controls

Senior Managers and Certification Regime (member's page) all the above can also help with making sure a firm is in compliance and can prove compliance with the SM&CR.





Governance Framework

A governance framework enhances a business and can clearly separate a company from the competition.  Clients and the FCA are very keen to hear about those firms who have a great governance culture and can prove that the clients are at the heart of its business (TCF). 

 

As Martin Wheatly, former CEO of the FCA, said:

 

”…..the regulator has a clear statutory objective to make markets work well for firms and consumers and hence more interest in achieving good customer outcomes.” 

 

This has been picked up by the present (23rd April 2019) CEO, Andrew Bailey, in his speech on the Future of Regulation. 

 

If a firm gets a reputation for “good customer outcomes” then it can keep products sold (retained) and continue to see revenue increasing.

The aim of Governance Connect (GC)

is to help wealth and asset managers continue to offer compliant products and financial services that give “good customer outcomes”.  The approach from GC is through enhanced due diligence (review), a report with findings and recommendations. 

Culture

Consumer outcomes can only come from a fundamental cultural shift within firms – of a kind that cannot be driven by external forces, such as regulatory intervention or a legislative duty – but a cultural shift and direction from the “top”. 

 

Rules are there to make sure “good customer outcomes” are delivered; the how has to be arrived at by individual firms.

 

Conduct

 

Good conduct is not simply about ensuring customer satisfaction, but delivering a good outcome for the customer. This goes beyond process and procedure.  Good conduct should deliver value for the customer and the shareholder with a balance between customer outcome and profitability.  It encompasses the client outcome and how organisations align their interests with the customers’ long-term interests as per Treating Customers Fairly requirements - embedding the customer at the heart of the organisation.

 

Please contact Governance Connect for more information on conduct risk identification and good customer outcomes: enquiries@governanceconnect.co.uk

Meet The Team

​Mathew Priestly is a chartered FSCI with over 20 years’ experience in the financial industry from working for HSBC Global Asset Manager, Barclays Wealth, UBS, Close Brothers and FundRock Partners.

Testimonial

"I had the pleasure of working with Matthew, while I was at Close Brothers Asset Management.  Matthew joined the investment specialist team and helped our team with presenting on multi-asset class propositions.  One particular area Matthew was strong on was in explaining to clients the rationale behind combining different asset classes together into financial solutions.  One particular area I would recommend him on, was his understanding of risk and return and in particular stochastic modelling, given he helped the business install that methodology into CBAM’s investment management outcomes, due to bringing with him his experiences from HSBC RBWM.  This allowed our business to link the giving of financial advice to the delivery of wealth management to clients and institutions.  In addition, I know his help on the product governance committee was invaluable given his understanding around the regulator’s desire for firms to monitor and justify good customer outcomes."

Chris Ighodaro – Investment Specialist at Schroders Personal Wealth

Remember that by the time a crisis strikes, it is too late to start preparing for it

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