Spotlight on case checking

I read with interest a story on IFAonline.co.uk and the comments that followed about Sesame doubling their case checking rates.

The network giant now checks on average more than double the amount of new business compared to a year ago, as it adapts to a more intensive regulatory environment.

The Friends Provident-owned company used to check about 15% of business written by its member firms but now reviews as much as 40%. Higher-risk cases, such as pension transfers, are checked more often.

The increase in case checking should not be a surprise in the current environment, as we move into an ever more intrusive world of regulation.

The most high profile example of FSA censure in recent times was perhaps Park Row, which was ordered to redress customers to the tune of £7.8m. In reading the supporting documentation to this censure, it is clear that insignificant case checking was at the heart of the failings with the level of checking carried out by the company reduced to 25% due to resource constraints (despite several requests from the FSA to increase the ratio).

It appears that Park Row also failed to take into account the knowledge and skills of the individual advisers when setting the ratio, and so increased the risk of a particular adviser giving poor advice. Park Row had increased the supervision of ‘at risk’ advisers, but had not addressed the post case checking of the advisers’ cases.

Sesame is installing Insight from Redland to help them manage case-checking in a timely and efficient manner, and the same approach has been taken by Openwork. In both networks, Insight will manage the workflow associated with the particular company’s case-checking procedures with the intention of driving an effective and efficient risk management process. 

Importantly, it will also enable risk-based checking to ensure the most high risk cases are addressed as a priority. The approach is not just linked to the adviser risk, but can also be linked to any other risks about the case such as product type, case value, or other client variables. Some would argue that the risk-based approach means checking resources are used in a more surgical manner with potential savings of time and money.

There is some debate in the industry as to whether pre- or post-submission checking is the most effective approach. In reality different distribution business models will suit different approaches. We are seeing small independent, directly authorised firms increasing the level of team working to give a holistic ‘panel like’ approach to advice across a client’s full financial needs. In such cases the model encourages peer reviews during the advice process with the intention of increasing the likelihood of correct advice and giving a seamless experience to the client.

Larger firms are still looking to apply a comprehensive post-sale review regime, and with pressure from the FSA on networks and nationals to ensure a compliant sales process, this is unlikely to relent. It is harder for these organisations to move case checking too far forward in the regime, but through the introduction of technology during the sales process, this becomes achievable, if not always politically acceptable.

From the technology perspective, it does not matter if the checking is before or after the sale. Solutions like Insight work on the concepts of advice cases, and can follow the case from lead to completion. As technology is used more and more in the sales process, this pre-sale case checking can become almost invisible in the background and where potential compliance issues arise, these can often be avoided, as the technology guides the sales process to deal with and resolve these issues.

There is no doubt that advisers in networks which impose a more comprehensive case checking regime may push back against the repositioning of such processes. However, as an industry, standards need to improve and be seen to improve to give greater client protection, and increased case-checking can help to achieve this.

While some advisers may object to the implication that they are not competent, holistic financial advice is complex and needs support to help protect the customer, the adviser and the network organisation.

Whether this support is before or after the sale (or both) depends upon the individual business model that is being supported.