What does a good Responsible Manager look like in practice?
To deliver financial services in Australia, a company must hold an Australian Financial Services Licence (‘AFSL’) or be authorised under another AFSL to deliver the relevant financial services.
The Board of an AFSL is accountable to the Australian Securities and Investments Commission (‘ASIC’) to maintain its competence to deliver the financial services covered under the AFSL.
The Responsible Manager (‘RM’) is a critical position that an AFSL holder has to maintain to retain its AFSL.
I’ve been working under the AFSL regime since 2003 and have been an RM on multiple financial services licences from retail to wholesale licences.
Misconceptions
Some licensees believe the RM’s role is to perform the role of compliance within the AFSL. While compliance is a key component of an AFSL holder’s relationship with its RM, from experience, the key role of the RM is to inform and assist the Board and management with significant day-to-day decisions about the provision of the financial services covered under the AFSL.
What does ‘good’ performance look like from your RM?
Using my two decades of RM and AFSL experience, I’d like to summarise what I believe a good RM does for its AFSL holder:
The Top 10 attributes of Good RMs:
Commercial: Drive commercial outcomes that benefit the AFSL holder’s bottom line.
Accountable: Are accountable for their performance to their Board and to the regulators.
Solutions: Deliver solutions to commercial issues rather than run interference for ‘compliance’ sake.
Scoreboard: Keep a close eye on the P&L and cashflows of the AFSL holder and work with the Board and management to drive income by delighting customers while prudently managing expenses.
Resilient: Understand there will be ‘bumps in the road’. Financial services delivery, by its nature, is very rarely linear. Be prepared for the unexpected.
Honest: Know that when issues inevitably arise, it is much better to recognise the issue and address it early. Bad news rarely gets better with age.
Coach: Work with Boards so that the Board shines in the eyes of the regulators. The Board has the most risk in an AFSL setting. Assist the Board to manage the risk load.
Relationships: Have a good relationship with ASIC and work with the regulator for when the unexpected occurs or when errors arise.
Experience: Have run their own business or have led other businesses in GM or CEO roles. The best RMs deeply understand business and know how to drive profitable outcomes for shareholders.
Comply: Understand and comply with the law and can show the Board how to comply with the regulations efficiently and effectively given the nature, scale and complexity of the AFSL holder’s business.
Conclusion
The AFSL holder’s Board is responsible for maintaining its AFSL competence.
The RM of the AFSL holder should do more than be the compliance person.
Would you like to consider how to get a commercial RM into your business to drive performance and business outcomes?
If you are a Board that seeks to drive performance from the RM position, please contact me to discuss how I can assist your Board with performance and to also maintain compliance of your AFSL.
https://www.andrewsmcneil.com/