Reflections on recent SRA changes to Client Money

Further to its recent consultation on client money, the SRA is making two substantive changes

With some exemptions, (a) firms will need to file accountants reports and (b) they will need to separate the Managing Partner, COLP and COFA roles

(a) is eminently sensible. I was never convinced getting rid of annual reports was a good move in the first place

For (b), Tom Blandford and Kate Burt have rightly flagged the practical challenges for small firms (with a therapy webinar tomorrow!)

But, for me, I'm struggling with what problem the role separation is intended to solve. I'm not quibbling the conceptual good governance point and I understand the shadow cast over client money by Axiom Ince (among others) motivating this

I just don't think role separation really achieves much in practice

I'm reminded of when I was applying for CFO/COO type roles a few years back, many of which would involve becoming the firm's COFA and so I was very alive to what that might feel like - ultimately concluding I didn't much like the feel of it!

One firm in particular, was an absolute basket case from the off, but my curiousity got the better of me. In particular, the, Managing Partner was a known forceful personality, NED and FD clearly under the thumb. MP evidently not all that interested in the most senior finance hire. I walked away after round 1 having seen more than enough red flags (tbf - I don't recall being invited back 🙂). The firm subsequently collapsed rather messily

But COFA/COLP/MP roles were held by separate individuals, so... box ticked I guess?

Role separation is neither a necessary nor sufficient condition for a well run firm, and I'm not convinced it would have materially changed outcomes around client monies in the Axiom Ince example

Bluntly, if you're minded to dip your hand into the client money account, you surround yourself with yes-men, whether they wear separate COFA/COLP hats or not

As Drucker didn't say - culture eats job descriptions for breakfast

Feels like this is a change that causes quite significant disruption for smaller firms to implement and provides little in the way of wider reassurance across the sector

Reflections on recent SRA proposals around Client Money