Advisers should look at how the UK handled financial services reforms in 2005 as a guide to implementing the Future of Financial Advice (FOFA) reforms, a global risk consultant says.

Richard Mason, Director of Finance at global consulting group Protiviti, says the lessons learned from the UK experience range from appointing a senior staff member to implement the reforms to updating documentation to ensure they comply with the client “best interests” test.

“Firms should allocate responsibility for implementing FOFA reforms to one senior member and ensure that the board minutes reflect the discussions and decisions,” he said.

“Firms need to demonstrate that senior management and executive bodies are fully engaged.”

Mr Mason says insurers must ensure control functions are involved at an early stage throughout the implementation of FOFA.

“Risk and compliance teams need to provide advice on the standards and approaches to be taken,” he said. “Internal audit teams also need to provide management with demonstrable assurance on the effectiveness of FOFA strategies.”

Companies should also ensure adequate audit trails of all decisions taken on FOFA, including the reasoning behind those decisions. 

“Those that take steps now to ensure they can demonstrate compliance with the ‘best interests’ test will be ahead of the game,” Mr Mason said.

“Firms need to start building protocols and documentation now so they can clearly demonstrate they have taken reasonable steps to comply with the ‘best interests’ test.”