Senior Manager’s Regime: Best Practices To effectively manage product governance together with the product lifecycle

Whatever Way You Look At It …. It Is A Tough Nut To Crack


Throughout the original journey to the FCA, the transfer of focus was distinctly from being a reactive to a proactive approach. The regulator is in fact attempting to stop customer detriment before it takes place where possible.

A vital element of the regulator’s attention is on products and so we have experienced a marked rise in direct attention paid to product governance and product life-cycle management over the last three years since the regulator started.

A fundamental question firms should really answer is precisely how, considering Conduct Risk and TCF, how they will guarantee and can adequately demonstrate they have put the consumer at the heart of their businesses. The FCA expects firms to be capable of demonstrating this in the context of all product and related, complimentary or auxiliary activities. Our company has also noted a large volume of Risk Mitigation Plan requirements concerning product governance, and questioning the robustness of the governance and approval arrangements, suggesting that this has become a potential hotspot for Boards and senior management.

There have already been numerous regulatory developments in this field in the past even from the 2013 FCA Risk Outlook that confirmed that a priority to the regulator is that firms design products and services that respond to real consumer needs and are in their long term interest. Although the latest Business plan for 2016/17 does not spell it out, the firm’s culture and governance, including the effectiveness of independent governance committees (IGC’s) is likely to include product lifecycle. Various thematic reviews concerning product, for example the publication on mobile phone insurance, which underline the significance of a product with the FCA and therefore this has to be related to culture and governance, ergo a firm-wide matter.

Whilst we don’t anticipate seeing a broad use of product bans, we are seeing a greater programme of product governance reviews being launched by the FCA. Additionally it is clear whenever action is initiated in respect of product intervention by FCA, there will undoubtedly be reputational and commercial impacts, to firms and their culture and overall governance will be investigated.

In reality, such powers will permit the FCA to:

  • Restrict the distribution and sales of certain product features;
  • Stipulate that a product is not promoted to some or all specific types of customers; and
  • In possibly the most serious cases – require that a product is withdrawn from sale altogether.

These requirements pose some real challenges for firms establishing, managing and reviewing their product governance and life-cycle approaches.


“How Many Holes Are There In Your Cheese?”

Examples of the key questions and challenges include:
Product and customer strategies

  • Have you got appropriately senior and experienced individuals involved with the setting of product strategy, having a sufficient and appropriate customer-centric approach?
  • Can you demonstrate that you have appropriately considered the suitability of all distributors for your products and fully understand their activities and are satisfied with the customer journey?

Committees to deal with the product approval, review and governance process

  • Is there a demonstrably suitable balance of committee membership, having a clear and identified “voice of the customer”?
  • Is there adequate documented evidence of customer-focused review and challenge?

Suitable product development and approval criteria

  • Do your processes and operational procedures result in clear identification of your target market and demonstrable customer needsfor every single one of your products?
  • Are customer risks considered at an appropriate stage and sufficiently early enough during the product development process, including appropriate customer involvement while in the product design process?
  • Exactly how do you demonstrate evaluation of product-related risks for your customers, for example distribution strategies, using third-parties, product sophistication or complexity and customer value?

Product review processes

  • Can you be sure that your particular products remain suitable as time passes for your target market and current environment in which they are sold?

Product governance

  • Does your Board demand and receive the right MI to effectively monitor the product progress to enable it to intervene where needed?

Whatever your needs are, we can provide an objective and detailed review of the evidence and assist you in plugging any gaps you may have.

Just call us on 0207 097 1434

The Coffee (or Tea) Is On Us!

Do You Need Assistance For UK Compliance Projects?


Got extra Compliance or Risk Project Work But No Resource?
Have a Restricted Budget?

Compliance Consultant is a niche Compliance Consultancy, we work with select clients at a time. As our new year approaches, we are looking to interview clients on a casual basis, typically away from the normal business setting. We find people often want to talk business when they are not distracted and as such we are holding several meetings with Lee Werrell, (the owner) throughout the City of London in the week 20th to 24th June 2016 to confidentially discuss your needs and how we may help. We don’t tell you what you need to do (unless you ask) we simply provide the right qualified and experienced assistance at the right price.

We are a very experienced and qualified specialists whom bring a wealth of practical,hands-on know-how from a commercial perspective that will support a pragmatic approach and application of real-life banking, investment compliance and risk solutions.

Previous clients that we have conducted similar projects with have achieved significant outcomes and obvious benefits that have included:

  • Implemented Conduct Risk Framework – countrywide – Building Society
  • £99M reduction in capital provision – Interdealer Broker
  • Appointed as a Skilled Person by the Previous Regulator
  • Avoided regulatory scrutiny by development of investment holdings software – Investment Bank
  • 50% reduction in operational losses (£1M value) – Middle office – Investment Bank
  • Removal from regulators watch list – all above clients

Cut The Tape To Your Effective, Qualified & Experienced Resource For Any Sized Regulatory Compliance & Risk Project – And Grab A Free Hot Drink!


Just email us at or call 0207 097 1434 to let us know approximately what time and day would suit you best. We will be located at reception in the The Strand Palace Hotel, 372 Strand, WC2R 0JJ, on the southern edge of Covent Garden Nr the Lyceum Theatre – nearest Tubes are Temple and Embankment.

Google Map is HERE

Latest Availability Update: No availability: Monday 20th AM or PM or Tuesday 21st up to 2.00pm, Wednesday 11.00 to 3.00PM or after 6.00pmThursday after 1.30pm. Not available Friday.

Future or discrete and confidential appointments at your office or nearby can be made by discussing it with us on 0207 097 1434 or email

# conductrisk #compliance #rmp

Bank Of England Building Sold For Luxury Retirement Apartments?

BlockChain Technology is frightening; actually frighteningly transparent.

The exterior facade of the Bank of England building in Central London
The exterior facade of the Bank of England building in Central London

This in itself is not enough to combat money laundering or terrorist financing, but the beauty lies within the procedure of “BlockChain Technology” and it becomes almost impossible to conspire to defraud.

Many people around the meeting rooms and after work meeting places in the city talk about BlockChain Tech as if they understand it, but, at Compliance Consultant, we find that when challenged, very few actually know what it does or in fact, how revolutionary it can be. The outcome could be a hefty change from the pained process of SWIFT payments, A disbandment of the facilities of Western Union and looking at the bigger picture, perhaps even Central Banks could be done away with, possibly even the Old Lady of Threadneedle Street to become retirement flats!

So What Is BlockChain?

In a simplistic way, to comprehend what BlockChain technology could provide is to perhaps imagine a paper based ledger (or even a digital one like a MS Excel spread-sheet) containing the assets held and transactions entered into by members of the same BlockChain network. This ledger, tracing the path of sequential transactions, can only be updated when a majority (and this is a key element) of authorised participants (in BC jargon known as “miners” whom are connected via “nodes”) simultaneously agree that the proposed transaction is valid and will not technically permit a situation where “double-billing” or “duplicate entry” could take place.

Once the miners have reached a sufficient consensus and the transactions are approved – only then will the new entries be permitted to be updated and committed to the ledger. The miners receive compensation in the form of newly created digital currency and/or by receiving a fee for processing transactions.

Further, the BlockChain style ledger maintains a full and potentially transparent “Audit-Trail” of all transactions ever made via that particular ledger.

The BlockChains can be;

  • public or closed – they can be public (open for all to inspect and controlled by no one) or they can operate privately within a closed community of participants (eg, within a virtual private network); and
  • distributed – they operate on a distributed basis (ie, the record or ledger of all transactions is replicated in full on each participant’s computer). As such, they are highly transparent because each participant has a complete, traceable record of every transaction recorded on the BlockChain.


The Financial Conduct Authority (FCA) in their 2016/17 Business Plan and Risk Outlook state that “Blockchain technology represents an alternative approach to the safe storage of information of value such as trade execution, clearing and settlement and custody. It can provide for secure, transparent and immediate confirmation of information that can then be distributed to all interested parties without the need for a central record-keeping authority. While this new alternative approach has many advantages, it also presents new challenges related to data privacy, defect corrections, and trust in decentralised financial servicing.”

Data privacy is likely to be an issue for all times, especially when human beings are involved and is highlighted in a recent article entitles “Employees Are Leading Cause Of Data Breaches” by Facility Executive. Defect corrections become easier as the transaction trail is transparent and should be a lot less of an issue depending on the quality of the software (so we are back to a people risk). As for trust in a decentralised financial system, there is not that much trust in a centralised system these days, so the potential of building trust in a digital and transparent, instant and unerring system could be really easy to overcome.

The Bitcoin currency garnered some pretty bad publicity for apparently allowing some bad actors (drug dealers, money launderers) to use this new digital currency to conceal their true identities and profit from their ill-gotten gains. However, in many senses, the virtual currency is what potentially provides Blockchain technology with such a broad appeal.

Many Governments believe BlockChain tech could simplify and improve the delivery of key if not all services and empower embattled regulators and central bankers to do their jobs more effectively.

So could this be the death knell for today’s financial services or a perhaps new platform for reinvention? The strange thing about the future is that it will mimic the past to a greater or lesser degree. There will be dangers and opportunities in varying degrees and undoubtedly blockchain will create winners and losers. Banks can thrive if they can steer clear of Clayton Christensen’s “innovator’s dilemma” and disrupt from within.


Japanese Banks Leading Change

While there’s a lot of talk and wide speculation regarding banks and governments attempting to create digital currencies, it appears so far it’s been mostly words. Mitsubishi UFJ Financial Group, according to Japan’s Asahi newspaper, is taking the plunge and will introduce its own virtual money.

It’s hard to overstate how big a change virtual currency could bring about. An obvious starting point is that it will enable cheaper and safer global transfers of cash, apparently one of the motivations behind the Japanese bank’s decision, according to analysts at Jefferies. That would reduce the role of SWIFT, the global inter-bank messaging platform and thus make it far less costly for migrant and ex-patriate workers employed around the world to send money home. Morally and ethically Governments will probably have to back the developments, given that digital ledgers potentially would allow not only for instant identification of who owns what, but also provide a background screening or credit worthiness check at the same time. This is something that regulators, national crime agencies and tax authorities would welcome as in most countries they continually have to request such information from brokers or markets.

In capital markets, digital currencies like the MUFG Coin (not an easily reconcilable term) could enable instant settlement of securities trades, which would obviate the purpose of marketplaces such as the Stock Exchanges int heir present form and effectively provide real-time liquidity. The key point is that unlike existing forms of virtual money, backed by nothing but their unique code, these new versions will be backed by governments fiat currency. By employing this robust backing the kind of speculation and swings that Bitcoin exhibited could be nullified or at least tempered..

Imagine how this prospect could change not just existing banking structures, but potentially replace the need for central banks too.

What is exciting is that a politically independent Global Currency unit of exchange that can be, if necessary, transferred to or from other units of exchange, in a faster payment system, clearing in minutes. This has certainly captured the imagination (and significant Research and Development Funding) from one of the world’s largest banking firms, the usually staid “Old Lady of Threadneedle Street” our Bank of England.

Some of the entities below are busily working away at figuring out just how they might use the BlockChain technology to at least stay in the game, or partner with other firms, include;

All retail, commercial and merchant banks, along with multinational and domestic credit scoring and rating firms, facilitators and issuers of credit or debit card facilities, mortgages and secured lending, corporate and municipal bonds, T-bills and asset-backed securities using BlockChain, could check creditworthiness before issuing, trading and settling traditional debt instruments directly, reducing the counterparty risks and increasing transparency. The unbanked minorities and potentially all entrepreneurs everywhere could access loans from peers and through peer to peer platforms. leading to an accelerated route to market for new inventions and innovations.

Market making will undergo profound changes as financial assets move from a historic paper-based format to a native digital format based on BlockChain. Settlement times on transactions can be reduced from days (or even weeks in some cases) to minutes or possibly seconds. This could be a huge opportunity for incumbents to reduce cost, but it is not without its own risks. Naked short selling would be almost eradicated.


Venture capitalists, IPOs and other project finance
The halcyon days of entrepreneurship could well be upon us. Ethereum, is a BlockChain platform supported by Microsoft, Manulife, Deloitte and others, and got its start as a “BlockChain IPO”, issuing native tokens for bitcoins. No need for bankers, lawyers, auditors and stock exchanges. In May 2016 it was worth US$1-billion. BlockChain technology fully automates the lender/borrower matchmaking, thereby enabling more efficient, transparent, secure models for many processes including peer-to-peer financing, recording dividends and paying coupons.

Insurance and risk management
By using reputational scoring systems based on a person’s economic and social capital, insurers will be able to make better informed decisions. This could explain why Manulife just announced a flagship agreement with BlockChain developer Consensus Systems. The current over-the-counter derivatives market, with a notional value of US$600-trillion, is paper-based and opaque at best, and relies far too heavily on centralised clearing houses. Moving all these OTC derivatives to BlockChain would reduce counterparty and systemic risk in the financial system.

Traditional accounting practices typically fail to keep pace with the velocity and complexity of modern finances. The BlockChain’s distributed ledger system (mentioned above) will make auditing transparent through time-stamped third entries on a BlockChain, which will enable financial controllers as well as regulators to more easily scrutinise financial actions within a corporation in real time.


Some pundits are already proclaiming the BlockChain technology as heralding the dawning of some kind of New Age while others are simply interested in how much money they might make or save by eliminating scores of mid and back office costs and the like. Still others are not yet convinced that their existing models and frameworks are as yet redundant and are bailing-out their boat with their teaspoon. What is clear is that the comet has definitely hit the earth and those with the thickest technology packed fur coats will survive.

To discuss your technology future and embedding of old processes in new tech, please call us on

0207 097 1434 or email

Paving The Way For MiFID II

Preparation For MiFID II


What is MiFID II?

MiFID II is the second casting of the Markets in Financial Instruments Directive issued by the European Commission and is due to come into force in January 2018. The aim of the new legislation, together with the accompanying Regulation on markets in financial instruments (MiFIR), is to overhaul, strengthen and extend the existing regulatory system in the EU.

Who will be affected?

MiFID II and MiFIR (collectively referred to as ‘MiFID II’) will impact upon firms and trading venues that deal in the provision of financial instruments and services within the EU.

The general list of affected firms is listed below but it is not exhaustive.

  • Broker-dealers
  • Stock Brokers
  • Investment firms
  • Credit Institutions
  • Portfolio Managers
  • Wealth Managers
  • Corporate Finance Companies
  • Commodity Firms
  • Market Operators
  • Central Counterparties
  • Data Service Providers
  • Independent Financial Advisers

Additionally, MiFID II introduces new regulations for Investment Service Providers and Counterparties outside of the EU, known as ‘Third Countries’. Essentially, the new regulations mean that all Third Country firms will be required to establish a branch and become licensed for business in an EU member state. Third Country trading venues outside of the EU will be regulated by the same rules and standards as their European counterparts.


Here are six Compliance actions that firms would be wise to take now in advance of MIFID II.

1. Remuneration

The directive proposes restrictions on firm’s incentive schemes, internal rewards and sales targets for all firms operating in both retail and professional markets as follows;

A formal remuneration policy is not only required but also needs to be approved and actively overseen by senior management. The policy should be aligning the remuneration and incentives structure to not only avoid conflicts of interest but also to encourage business conduct responsibility by the individual and encourage the fair treatment of customers. On creating the policy, assessing and remunerating staff in any way which incentivises them to sell a particular product or service or in any other way conflicts with the clients’ best interests rule, COBS 2.1.1R.

This may be important if any firm’s have contractual bonuses or longer term arrangements that will clash with the new start date. Obviously any new contracts and staff handbook rules regarding this need to be revised as soon as possible so that breaches do not occur on day one.

2. Update Employee Policy and Training

Under the latest recital, Investment Firms shall ensure that relevant staff possess the necessary expertise or receive the appropriate training to understand the characteristics and risk of the products that will be distributed and the services provided as well as the needs, characteristics and objectives of the identified target market. Articles 16 and 45 of the Directive state that firms must provide adequate staff training so employees can understand the rules and also maintain an audit trail of the controls and processes that address the regulation.

3. Communications

Whereas MiFID II is targeted to enhance communications to non-retail clients, there are no great surprises and ESMA has confirmed that its technical advice does not apply to eligible-counterparties. Therefore firms have greater flexibility to determine how to comply with the Level 1 requirement for all communications with eligible-counterparties which needs to be ‘fair, clear and not misleading’ and need not be overly constrained by ESMA’s proposals for retail and professional clients, which are more prescriptive.


4. Online Content Approval Process

The obvious requirement is that a firm’s digital marketing content be fair, clear and not misleading. We would urge you most strongly that you look to putting technology in place to assure that your advisers are sharing online content that has first been approved and recorded as appropriate by the firm’s compliance department, before sharing any of that content with clients. Furthermore and related to this is Article 25 which requires firms and advisers to ensure the “suitability” of their client’s needs in order to make appropriate product or services recommendations; an outcome which can be achieved by having proper compliance technology and efficient workflows in place. Additional requirements are that ALL communications are recorded and kept for 5 years (see point 6), but this does not include face-to-face interviews, confirmed by the FCA in 2014.

Firms should consider employing technology that can be made bespoke to their supervisory needs. This could mean that the need is to have all content pre-approved before advisers can use it, or perhaps to have pre-approvals or post-approvals mandated based on type of content, seniority or compliance status and possibly different digital channels.

5. Product Governance and YOUR Sales Process

The Directive introduces an EU-wide product governance regime which applies to both sides of the product development and sales process, namely to:
(1) product manufacturers; and
(2) product distributors (if different).

Product Manufacturers are to be required to maintain appropriate product governance policies & procedures as part of their organisational arrangements. Included in this is a specific product approval processes requirement to ensure investment products are essentially designed to be appropriate, ‘consistent with the needs’ of identified target markets, distributed appropriately to the target market, as well as the relevant risks assessed. It goes further to require that appropriate information is made available to distributors, and investment products are regularly reviewed to ensure that they are being sold appropriately and remain consistent with the identified target market.

Product Distributors (if different), are required to ensure that the firm’s staff levels of knowledge and understanding of the products allows them to closely match these to the needs of their clients. This is primarily linked to training from product manufacturers on products and access to all information (including from product manufacturers) necessary to enable the distributor to sell the product appropriately. Product Distributors are also required to regularly review the products they market to assess and record whether they remain consistent with the needs of the identified target market and whether their distribution strategy remains appropriate.

6. Accurate Record Keeping

In compliance with Articles 6 and 69, firms will are to be required to keep records of all electronic communications which includes those via social media, email and text messages. These requirements are to be from any device, ensuring that they maintain adequate records of disclosures of potential conflicts of interest. The reasons why YOU NEED a Social Media policy are explained HERE. Records should be easily obtainable and available to clients for up to five years and, for regulators, up to seven years. It’s also important to record communications in a linear manner to avoid having to piece together communications from different devices if audited. Date and time-stamping is obvious with special access only available to compliance for archived data.


In Conclusion

January 2018 may seem a world away, but many of these things will take time to implement and embed and to comply with the rules, a swift and systematic approach to reviewing what MiFID II means to YOU and YOUR FIRM is strongly recommended. MiFID II is one of a range of new regulations that are being considered to address the gaps discovered in European capital markets operations after being exposed during the recent 2008 financial crisis. Firms that are able to plan and implement robust MiFID II compliant technology platforms for digital communications, governance and adviser processes will be well positioned to continue with “Business As Usual” throughout 2017 when most others will be panicking. Call us for your MiFID II readiness assessment needs and gap analysis on 0207 097 1434 or email

Is Your Firm A Digital Dinosaur?

Many Financial Advisers & Wealth Managers Are Kidding Themselves That Their Client’s Don’t Want Digital Communications Or Tools To Manage Their Affairs. A Report From One Of The Big Four Bears Out The Facts That Many Are Dinosaurs In A Digital Age


The report is entitled ‘Sink or swim: why wealth management can’t afford to miss the digital wave’, and is published by PwC

The findings are based on a survey of wealth relationship managers, CEOs, FinTech innovators and HNWIs. The figures revealed that over half of HNWIs surveyed by PwC believe it is important for their financial advisor, or wealth manager, to have a strong digital offering.

Financial advisors are far behind their clients in using online tools and communication media. The report shows that just a quarter of wealth managers offer digital channels beyond email, yet 59% of respondents consider their company is above average with regards to its digital offering. If you then contrast this with 85% of High Net Worth Individuals (HNWIs) who use at least three digital services in their day-to-day lives, there is quite a mismatch from where they are, where they think they are and what level their clients are at already are. The report also highlights the fact that more than two thirds (69%) of HNWIs use online/mobile banking and 47% use online means to review their portfolio, or investment markets while 39% use online portfolio management.

Only 37% of clients are happy with their financial adviser and only 39% of HNWIs are likely to recommend their current wealth manager. Over 27% of clients currently use an automated advice platform when investing.

Further revelations (are they really?) is that 63% are unhappy their adviser takes into consideration their wider goals when providing advice. 67% are unhappy because they consider their adviser doesn’t use the information provided to tailor their advice and a massive 53% are concerned at their data being kept safe.

The report’s main conclusion is that financial advisers & wealth management are the least tech-literate sectors of the financial services industry and is falling well behind other industries.

Perhaps the ostrich syndrome is more evident in the fact that many wealth relationship managers do not consider robo-advisors a threat to their business and repeatedly insist their clients do not want digital functionality. This, say the report, directly contradicts the importance their clients place on it.

Isn’t it time to get onboard and build a compliant suite of interactive tools to service your clients positively and increase your client advocacy?

Compliance Consultant can Help You Create Digital Campaigns As Well As Check The Posts, Tweets & Articles For You.

Call us now on 0207 097 1434