Financial planning practices are struggling to find compliance staff with the right mix of industry experience and training, according to the head of a leading non-bank aligned licensee.
This is being driven by a combination of global and domestic factors, including increased compliance requirements under the Future of Financial Advice (FoFA) regulatory regime.
“There’s less tolerance for not doing the job fully… with many lessons to be learned from people who under-resource [in terms of compliance],” says Paul Harding-Davis, chief executive of Premium Wealth Management.
He speaks from personal experience, having been seeking a full-time, in-house compliance manager for some time. A major sticking point for him lies in finding candidates with specific financial planning industry experience.
“There are quite a lot of smart, talented people who have come out of university into compliance and worked their way though, but not as many have been planners before they chose the compliance route.
“We prefer someone who has at least been a paraplanner [before moving into compliance],” he says.
Harding-Davis wants the successful candidate to have this area of experience so they can more easily challenge their financial planners where necessary.
“When you say ‘you need to do something different here, this isn’t best practice’ we want them to be able to…have enough understanding to make some suggestions.”
Beyond A to Z
While acknowledging the importance of finding a compliance manager who follows established guidelines, Harding-Davis believes it is crucial that they take a more holistic view of the role.
He says that they must “have enough experience with plans to look at the client file, to fact find, identify what the client wanted and needed, look at the SOA…which is all important stuff, [along with making sure] the client has signed the fact find and so on”.
“But not as important as the substance, [as making sure] that what the clients says is reflected in the objectives and scope of the plan.
Highlighting the difficulties that finding this combination of planning experience and compliance expertise presents, Harding-Davis says he interviewed someone just recently “that I could start next week – if I was looking for a junior person to train up”.
Even having identified a couple of other suitable candidates that were formally offered the role, Harding-Davis says on each occasion, their existing employers retained them by making extremely generous counter offers.
He points to this as further proof of not only how tight the market is for compliance managers, but also of the rising human resources impact of FoFA.
“If demand is that tight, that therefore there’s more and more people seeking [compliance managers]…that does mean the compliance burden is rising across financial services,” adds Harding-Davis.
A compliance job-seekers’ market
Salary hikes among financial services compliance specialists also highlight the growing supply-demand imbalance. Average salaries “have probably jumped anywhere from about 20 to 40 per cent over the last two years…that’s bigger than for other areas of compliance,” says Henry Smith, manager – internal audit, risk management and compliance at recruitment firm Robert Walters.
“We’ve witnessed a significant increase in the amount of compliance and governance staff requirements over the last two years in the financial planning sector, largely driven by uncertainty over FoFA legislation.
“There is a bit of a skills shortage [of compliance candidates] with strong understanding of financial planning products and processes, as well as strong regulatory compliance understanding.
“Individuals in both of those [areas] are in strong demand and short supply,” Smith adds.
He says that the average length of time it takes to recruit for compliance roles within financial services has grown from an average of around two to three weeks to more than a month.
As a result of the difficulty, with increasing regulatory pressure and associated costs, “many of those smaller networks are outsourcing their compliance requirements to consultancies and external providers”.
