Training & Competence

One of the major planks of the regulated environment has been the implementation by every regulated entity of a robust Training & Competence (T&C) regime. Whether this was regarded as a chore by many, the importance of its function within the framework of the Financial Services Authority’s (FSA) remit has meant that most companies, with an eye for the longevity and health of their businesses, have recognised the serious effort that must go into creating a scheme as individual as the business they are running. The light has also begun to dawn that far from being another burden, T&C really can help firms reach their corporate objectives.

The key word in any discussion about T&C is ‘balance’. The scheme has to recognise that in interpreting the requirements of the FSA’s rules, covered in the T&C Sourcebook, and the general principles, there is still a business to run at the end of it. If the T&C regime does not bear in mind that the business still has to function then it is likely you might have the world’s best T&C scheme but it could make the actual business dysfunctional. Therefore an effective scheme should be sympathetic to the business and at its best enhance the interface with the customer, whether that is via face-to-face contact, over the telephone, correspondence by letter or e-mail or over the internet. In its simplest form, the best schemes provide positive benefits to the company, as well as protect the needs of the customer and any interpretation of ‘Treating Customers Fairly’ (TCF).

So what makes a scheme robust, but not prohibitive? Primarily, it should reflect a philosophy of best practice and catalogue all the elements to allow management, and those who have responsibility for compliance, to measure achievement and adjust training and procedures according to results. With a written T&C scheme in place, there is a template that benchmarks performance. Of course, the written document is also a work in progress that will need to adapt to changing business conditions and regulatory amendments.

I would like to look at the main areas which need to be addressed when putting together a documented T&C scheme. Again, as we go through these main headings it becomes easier to see how much a T&C scheme makes a business owner look at his business and the efficiencies that can be gained by adopting T&C as a powerful business change management tool.

Recruitment

• While larger companies are already familiar with written job descriptions smaller companies might baulk at the idea, particularly when employees are filling multiple roles, the job description or role profile should be seen as the foundation for recording competence. For the purposes of compliance however, the main points which need establishing are:
• A skill match – does the person doing the job have the right attitude and skill set to do the job competently?
• Right qualifications – it might seem like a no brainer, such as employees having CeMap where it is appropriate, but ensuring that employees have the right qualifications whether they are mandatory or not, helps the employee in the assigned role and adds value to the T&C programme.
• Gaps in employment – a mandatory requirement for individuals taking on work in a regulated environment is to ensure that there are no unexplained gaps in periods of employment. However, in an ideal world all employers should make sure they really know all their employees’ background. This really tightens up employment policy. It could actually save money in not having to get rid of people whose employment past was arguably less than impressive.
• Did the person have a similar role in their last job?
• Fit and proper – how many firms would run a credit reference check on new employees before the requirements of the scheme made it mandatory. Apart from reducing the risk to customers, it reduces employer risk as well. Parameters will need to be established on what is unacceptable, for example, someone who is an undischarged bankrupt.

Approved Persons

The Approved Persons regime demands greater oversight and therefore more checks and procedure before appointment. These would include:

• Longer minimum period – the minimum period to investigate employment history is five years and all gaps in employment must be explained and evidence obtained. A police check may also be appropriate in addition to a financial search.
• The firm must make arrangements to obtain FSA approval to the application – this can take up to a few weeks;
• That the person cannot take up their responsibilities until approval is received;
• What changes have to be notified to the FSA;
• How on-going fitness and propriety will be monitored.

Most importantly, firms must be mindful that Approved Persons and key senior management must be included as an integral part of a firms T&C scheme. Management must be seen as playing a key role in showing a commitment to T&C and ensuring that it forms an essential part of its culture. The FSA makes no allowances for the controllers of a business to be outside the firm’s T&C regime and performance management schemes.

Training

In establishing job needs, ensuring that the training programme contains the following elements is vital, as is the need for them to be tested and signed off by their supervisors prior to customer contact. Induction training should include Health & Safety, DPA, Money Laundering, Complaint Handling, the concept of ‘Treating Customers Fairly’, working within a regulated environment and the company’s limit of authority. Having been advising companies within the Regulatory Alliance of Mortgage Packagers (RAMP), the following ideas might be useful to intermediary firms when designing courses:

Use role play as appropriate;

• Do not employ the ‘sitting by Nelly’ approach to training. Getting new people to shadow staff already working is an easy way of the new person picking up bad habits;
• Dual controls – supervisor listening in and prepared to come in to address remedy if necessary;
• Sign offs can be staged, and when deemed competent by testing and observation, allocated to a supervisor for onward oversight;
• Treat new entrants as a higher-risk but with a reducing audit trail over the first three to six months, with monthly reviews.

The FSA places great emphasis on firms being able to demonstrate that their staff are maintaining competence and intermediaries are required to undertake an appropriate development programme to ensure that competence is maintained at all times. Firms should have arrangements to ensure that staff maintain their levels of competence and such arrangements should cover the same topics as those required for attaining competence.

Supervision

Staff must be supervised at all times. But who supervises the supervisor? This is often a key area that is easily overlooked, but a few simple controls can be incorporated into a firm’s overall T&C regime to demonstrate that the role of the supervisor is being suitably performance managed.

For instance, the FSA’s guidance in this area suggests that appropriate competencies for supervisors would include:

• Assessment skills;
• Coaching;
• Knowledge of products and processes;
• Good knowledge of the market.

Firms should always consider the number of advisers that a supervisor can properly manage. This, of course, will very much depend on the qualities and standards of competence that exist within the group, however, good firms will set down standards for supervision and competences that are required to fulfill the role.

Training Records

It cannot be overemphasised just how important good record keeping is when developing robust T&C schemes. Past experience has shown that this has often been the least managed part of the process and has let down firms badly.

Best practice suggests that key records to be maintained centrally will include:

• Initial competence assessment;
• Date of commencement of the activity;
• First assessed competence;
• Proof that the individual has passed the appropriate examination;
• Competence sign-off form;
• Regular assessments taking place;
• Training undertaken;
• All important CPD which should be in line with the type and level of business being transacted.

Training staff to achieve the highest possible standards does not come without certain financial commitments being made. But only by applying a solid commitment to the training of staff will firms improve their performance. This in turn leads to customer satisfaction that will remain a crucial element of the whole process in achieving the FSA’s ‘Treating Customers Fairly’ standards. Just remember – even if T&C was not a regulatory requirement any successful business would want one.

Nick Battersby is compliance director at the Regulatory Alliance of Mortgage Packagers (RAMP)