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On the side of entrepreneurial financial services firms

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The weight of regulation on the UK’s growing financial services sector is increasing. It is vital that FCA-regulated businesses choose advisers that combine deep technical knowledge with experience in their industry, says Anil Kapoor, a partner and head of Mercer & Hole’s growing Financial Services practice.

Anil joined Mercer & Hole in July 2022 bringing years of experience drawn from advising some of the world’s largest Financial Conduct Authority regulated businesses. He is now building a growing practice at Mercer & Hole that acts for entrepreneurial and fast-growing financial services firms.

With Anil leading audit and compliance work for regulated businesses, Mercer & Hole’s wider team brings expertise in tax, VAT, corporate structures and, for smaller businesses, a fully outsourced finance function.

Mercer & Hole’s Financial Services practice counts as clients fund managers and their underlying funds, family offices, M&A boutiques and fintech businesses operating in the money exchange, foreign exchange and money transfer markets, all drawn to the firm for its highly personalised support and deep expertise.

“What brings many of these businesses together,” explains Anil, “is that they are all heavily regulated, often in retail markets and with any failure to operate correctly having a significant impact on the financial lives of many thousands of people.”

The retail financial services landscape is increasingly technology-driven and highly competitive. The investment needed to build a successful retail financial services business is high, with the cost of mistakes potentially disastrous to continued operation.

And that, says Anil, is where experienced advisers step up and are invaluable.

“Financial services businesses need advisers who bring extensive experience to the table – someone who has seen many of the potential issues before. They need an auditor who can speak or stand up to all stakeholders, and who is not afraid to ask difficult questions and highlight areas for improvement.”

Regulation and auditing standards

The FCA continues to focus its activities on preventing service harm, adopting greater use of technology and analytics to keep companies in check. Anti-money laundering reviews are increasing and far-reaching.

“The cost of compliance is increasing,” explains Anil, “with the FCA better resourced and more prepared to invest time investigating firms. And financial services firms do not want to be on the FCA radar.”

Anil and his team know what is on the FCA’s audit radar. international Standards on Auditing 315 – or ISA 315 – continue to dominate discussions having completed a cycle of audits.

The changes are complex says Anil but can be distilled into the need for auditors to truly understand their clients’ businesses with many clients expecting the process to add value given the associated increase in fees.

“For financial services firms, that means we need to understand the risks, controls and systems in place to minimise those risks. It means we need to be more intrusive, asking often challenging questions that may highlight weaknesses in those controls and systems.”

Yet it is not something financial services businesses should fear. “We have found that it creates a much better relationship between clients and their auditors,” says Anil.

Time for change

The audit landscape for businesses is changing and with it the demand for topflight auditors. They are not always easy to find. Audit fees in larger accounting firms have increased often by as much as 40% and in some cases without necessarily seeing an improvement in the service levels.

Start-up and ambitious financial services firms are looking for change, recognising that the partner-led approach of mid-tier accountancy firms brings both deep expertise and sensible fees.

“Our offer to financial services firms is backed up by a team with deep expertise developed over many years with first-class experience across a wide range of businesses,” concludes Anil.

To read more about Anil Kapoor, click here.

Anil kapoor audit and business advisory partner

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