FCA T&C -Pathway to competence – the challenges and best ways to get a new entrant to competence in a smaller firm


So you’re a smaller firm looking to take on a new entrant. Just the one until you see how it goes. Here’s a few thoughts on what challenges this might bring and what you should to consider to help overcome these challenges.

The first thing you need to be very clear about is exactly why you are taking on another adviser. Firms generally take on new entrants either to increase their business stream through the expectation that the new entrant to bring their own clients into the firm with them, or perhaps to service an “orphan” client bank or those clients released for specific reasons by other existing advisers within the firm. It may of course be a combination of both, but whatever the reason you will need to identify the type of new entrant you are looking for, and this in itself will pose different types of challenges from both a business and a T&C perspective. For the purpose of this article we’ll assume that the prospective new entrant already has industry experience, since a new entrant to the industry presents completely different challenges altogether.

Apart from the usual due diligence you can start to identify some of the challenges ahead (you won’t identify them all) in your early discussions with the new entrant. It’s far better to establish the challenges before you take a new entrant on, as opposed to once they’ve joined, as this could make the difference between offering the position or not. You certainly don’t want to discover afterwards that you’ve made a poor decision. From a business perspective a top producer working for another firm may not replicate that production once they’ve joined your firm. From a T&C perspective is the new entrant going to be a good fit with the T&C scheme?

these also have the same initials, but here the initials stand for Culture, Ability, and Sustainability. 

Within the T&C framework and using the FCA rules, we all know that the initials CAS stand for Competent Adviser Status, which is what we want this new entrant to achieve as quickly as possible as this reduces the overall level of supervision required. However there are other areas we should be examining before we take the new entrant on, and these also have the same initials, but here the initials stand for Culture, Ability, and Sustainability.  Let’s look at Culture first.

It’s important to understand what type of culture the new entrant is working in, or has previously worked in, as culture is intrinsic to the ethos of the firm and the way it conducts itself with its clients. It could be that the new entrant comes from a firm used to dealing with high end clients, and thus their expectations from their client base may be different to that you are able to provide them with, whether they bring clients into the firm or not. The challenge here is that the new entrant may pay less attention to clients where there is a perception that they may not transact certain types of business, or that the income stream generated may be lower than they’re used to. Similarly, if your firm operates in the corporate arena the new entrant may not have not have any experience in group presentations and holding surgeries on a corporate clients’ premises, and thus may not see the value in dealing with this type of business. You should also find out what type of T&C scheme they are used to, what sort of supervision was undertaken, what hours and locations they intend to work, and perhaps ask what file check outcomes they were achieving to identify any potential trends, for example inaccuracies or poor administration, although this might be harder to substantiate.

Ability is not just the level of qualifications achieved, or the levels of business the new entrant is used to producing. It’s also about the types of business that the new entrant has been writing. Your new entrant might, for example, have come from a firm that primarily transacts investment business, and therefore the new entrant, even with the relevant qualifications, may lack up to date knowledge or even recent practical experience dealing with pension or protection business, for example. Your new entrant might be used to working in a focussed financial planning environment and may struggle to adjust to one where holistic financial planning is required, or they may have worked under a restricted advice status and are now joining your firm which is fully independent. Both transitions will bring their own challenges and you’d want to consider how you can plan in any additional training and support.

Sustainability is about ensuring that you get your investment back and building for the future. You’d want to be discussing a business plan that meets both the needs of your business and that of the new entrant, and one that is achievable. But it’s also about identifying and laying the foundations for a good relationship between the T&C scheme and the new entrant, so you’d want to identify if it looks like you’re in for a sustained period of heavy monitoring. You should consider what level of support does new entrant need, and if so, how much, and from whom? If you’re expecting them to help you grow your business by bringing clients with them you would want to know not just what sort of clients, but what expectations to they have with regards to future business transactions. It’s likely that the new entrant will join you under some form of restricted covenant from their previous firm, so what are the terms and how long does it last? Would this impact on their ability to provide sufficient business transactions to ensure that there is enough evidence to allow the required levels of monitoring and evidence to meet the T&C schemes KPI’s, both now and ongoing, as you wouldn’t want the new entrant to start well and then gradually dry up. If you going to provide them with clients consider how best to match the new entrant to the source and quality of the clients.

Even if the above meets your expectations, perhaps the biggest challenge in a smaller firm is that of resource. All T&C schemes consist of a number of periodic tasks that need completion, so you will need to establish how much additional time is required to fulfil those tasks once your new entrant is on board. You need to consider the increased level of supervision, particularly in the early days, along with any training or coaching requirements. The new entrants’ supervisor may be responsible for your other advisers, and may even have a split role within the firm. It may have been a while since you took on a new entrant, so you should review and update your induction plan, assuming you have one. A good induction plan is key to reducing potential issues and during the implementation may also identify other potential challenges that have not come to light in your pre-joining conversations with your new entrant. Finally, consider the impacts on your support staff, as some, like the para-planners, will also fall under the T&C scheme and the additional workload could present further challenges.

We talk a lot about “Know Your Client”, but we must equally apply this our people. The best way to get a new entrant to competence is to build a similar relationship with them as you would with your clients, understanding their strengths, weaknesses, past story, and future aspirations, building a contract between you so that together you can identify and work through the challenges you are both likely to face, and a plan to deal with those that suddenly occur.


About Author

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I am a highly-versatile and forward thinking management professional with a history of successful delivery across more than thirty years’ in the Financial Services Industry. Core skills include assessing, training, coaching, process design and implementation, specialising in people, processes, and procedures within a Training & Competence or Learning & Development framework. Periodic writer for T-C News.com

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