Congratulations to the team at Barnett and Barnett, a medium-sized broker from Middlesex. They won an important award for their training and competence scheme recently.I hope that any readers who are proud of the work they have done in the area of training and competence considers seeking accreditation of their efforts.However, the feedback from the industry generally presents evidence of undertones of serious non-compliance. There is the prospect of a blood bath when the FSA finds how little is being done to reach a reasonable standard of adherence to the rulebook.Let us ignore what the rule book (TC1 and TC2) actually says at the moment and consider, in plain English, what each and every firm has committed itself to when submitting an application for authorisation:
That staff will be competent to do their jobs That staff will remain competent to do their jobs That the firm will supervise and monitor staff.That is not all the FSA says. If you transact business with private customers there is a fair amount of prescription, but for every reader of the CPD page, these are the three commitments that I want you to focus on today. We have been here before over the past three years on the CPD page but we need to revisit the subject.To put this in perspective, you have made a declaration that at 14 January 2005 your firm will be compliant and that, put simply, you will satisfy (among other things) the following statements.1. The majority of full-time brokers are substantially compliant with the above but cannot prove it. To address this you need to undertake the following tasks:
Define what each member of staff has to do and to what standard (the job specification and benchmarking) u Assess what the member of staff can and cannot do and to what standard (the analysis) Develop a learning plan for those that have gaps in knowledge and understanding or actually doing the job Reassess to ensure that standards are met Provide direct supervision for staff who do not meet the benchmarks Continue supervision for those who are competent Keep a record of everything.2. Because ability to do the job is a major factor it is unlikely that any two brokers will have a T&C plan that is exactly the same as another. So beware of the universal 'fix it' offerings. Perhaps 90% of it might be the same as everyone else, but that last 10% makes the plan fit your firm's culture and aspirations like a glove.One slightly strange but common format in which brokers may work is an open-plan room, with no barriers between each other, other than perhaps simple screens. One of the interesting points about this format is that experienced, competent and not competent staff, are thrust together in one room.Even in the larger firms it is not unusual for departments to be structured in this manner and the process of supervision and risk management would appear constant.One of the commonest and indeed most famous examples of this scenario is the box at Lloyd's where multi-billion pound risks are underwritten in this environment.Here are some of the comments we commonly hear from the managers of such units when discussing the FSA's requirements and the commitments:"We have constant supervision.""We are constantly training staff on the job.""We have never had a PI claim.""Our staff are all mature and experienced.""All our staff have worked together for years."My approach is supportive and I sincerely hope the FSA's would be too, but the situation is flawed if we allow the tradition of this method operation to continue totally unchecked. How do we know that the 'supervisor' is competent? What are the benchmarks? The fact that individuals are being trained needs to be recorded. The most experienced and mature staff are likely to deal with the biggest risks, but are also likely to be the least supervised employees. Working together for a long time means that bad habits are likely to have developed as activities become familiar or commonplace.Recently, I was organising a one-day workshop on the design and implementation of a T&C plan and two of the delegates were highly experienced brokers working in this way.One broker, after half a day considering the situation, was in my opinion spot on with the observation that the unstructured and non-proactive method of learning and supervision that commonly persists in the market, is a system waiting for something to go wrong. It is reactive to crisis, rather than one that seeks to prevent it.
Risk managementThe FSA is non-prescriptive about how an authorised firm meets the commitments when dealing with non-private customers. But there is enough said about the importance of risk management and the FSA's own statutory objective of protecting the public that a reactive approach is unlikely to be sufficient.The learning point today is that on-the-job training, coaching, supervision and competence assessment does have its place. But in reality, time and resources should be set aside for structured learning, competence assessment and supervision. Above all, those designated as supervisors should themselves be trained and assessed as competent.One of the most important points to consider is that having declared that a firm will be compliant by January 2005,the FSA will expect to see a plan of how you intend to achieve that objective.A firm is perfectly entitled to employ whatever method it sees fit to be compliant (whether it is compliant or not is another matter) and changing nothing from current methods is an option. Just make sure that you can demonstrate how the system works and how it is going to meet FSA requirements in time.If you have not done so already, every practitioner should go to the FSA website and down oad the FSA handbook on training and competence (TC1 & TC2).Remember that the handbook covers life and general so, in particular there will be reference to compulsory examinations, but ignoring this you will find that this is one of the simplest and most clearly written documents that the FSA has published.
Robin Wood is principal of RWA Group This page is edited by RW Associates, a specialist in training, compliance and competence. Email: ruy.lopez@brokercompliance.co.uk 
