The Compliance inbox for 2023
Much has already been written about 2022 – 4 Chancellors, 3 Prime Ministers, 2 Monarchs and 1 England World Cup disappointment (well, some things don’t change!) – amongst other major events. However, in a turbulent year, Holden & Partners has much to be proud of with our second Impact report solidifying our BCorp credentials, the completion of our latest Sustainability Guide and winning the Financial Advisor Team of the Year Award at the STEP Private Client Awards.
So, what does 2023 have in store? I can’t predict that, however, from a personal perspective, there is certainly a lot to focus on as I enter my second year as Compliance Director at Holden & Partners.
The firm will be celebrating a significant milestone of 20 years. Looking all the way back to those beginnings from a regulatory perspective, our industry has changed significantly over the past two decades. Treating Customers Fairly (TCF) in 2007/08 was the regulators first real focus on client outcomes and this was followed by the Retail Distribution Review (RDR) towards the end of 2012 (10 years ago – time flies!) which paved the way for changes to charging models across the industry as commission was broadly eradicated and fees became linked more to service.
More recently, we have seen the introduction of MiFID II requirements for smaller firms, as well as the Senior Managers & Certification Regime (SMCR) and Insurance Distribution Directive (IDD).
Whilst all the above have helped shape our industry, 2023 will see two more regulatory initiatives that aim to take things further.
Firstly, the FCA’s Consumer Duty rules were published last year, requiring firms to review all aspects of their business and implement changes where necessary. In short, the Duty will build on existing principles but take things to the next level. Whereas before firms had to demonstrate that they were acting to avoid consumer harm, the Duty now expects firms to demonstrate they are putting good client outcomes as their top priority and must adhere to the new principles by 31st July 2023.
All firms, whether they be providers (manufacturers as defined by the Duty) or advisers (distributors) will have to review their existing processes and procedures and even those firms best placed will have work to do before the end of July.
Some have the misconception that small firms will struggle to implement the requirements of the Duty. Whilst undoubtedly there will be some who suffer and will need to focus on ensuring they have the resources required, there are plenty of advantages.
2022 saw continued consolidation in the advice/wealth management sector. Holden & Partners is now not only one of the longest running firms, but it is also one of the very few remaining truly independent (both in terms of investment proposition AND ownership) advice/wealth management firms of mid/large size. We have our in-house investment team in place and, with no external ownership, do not have any concerns or outside influence on what we do and how we do it. Our advisers are free to offer clients the best possible solution without any concerns about potential conflicts of interest. The other benefit this gives us is that we can maintain our culture, strong governance and give 100% focus to our main priorities.
There is work ahead for us, but our existing framework gives us the advantage of being well-placed to implement the Duty’s key objectives.
Alongside the Consumer Duty, we are expecting final rules/guidance from the FCA in 2023 on the Sustainability Disclosure Requirements (SDR). The initial consultation closes towards the end of January and we will be responding with our views.
The SDR consultation and rules are aimed at providing greater clarity for investors on Sustainability-themed investments. There is also an aim to stamp out ‘green-washing’, which can occur where firms may make unsubstantiated claims to deceive consumers into believing that their products are environmentally friendly or have a greater positive environmental impact than they actually do.
We support the introduction of SDR and will review further consultations and guidance issued by the FCA over the coming months. Holden & Partners has been at the forefront of highlighting sustainability since inception and as the concept becomes increasingly mainstream, we welcome consistency and regulatory focus in this area.
There is still progress to be made but in the long-term we feel that clients can only benefit from an industry that puts them at the heart of decision-making. The increased focus on sustainability will also support our approach of putting people and planet first.
If you know anyone – whether advisers or support – who would benefit from being part of our independent and sustainability-focused team, we would be happy to talk to them.
Wishing you all the very best for 2023 and, above all else, a healthy year ahead.