Most experienced recruiters have placed a compliance manager, a finance director or a head of risk at some point. Fewer have placed one into a role that needs regulatory approval before the candidate can do the job. That second kind of hire looks almost identical on paper. In practice it runs on a different timetable, with a different set of checks and a third party, the regulator, who can say no after the client has said yes.
I’ve spent my career in finance and recruitment. I’m a Chartered Accountant, a former listed-company Finance Director and founder of FD Capital. Over the last few years I’ve watched more and more of our searches turn on one question: can this person be approved? That’s why we built SMF Capital, a practice that focuses entirely on Senior Manager Function appointments at FCA and PRA-regulated firms. This post explains what makes these hires different, where they tend to go wrong, and what any recruiter working near financial services should know.
What a Senior Manager Function Actually Is
Under the UK’s Senior Managers and Certification Regime (SMCR), certain senior roles at regulated firms are designated as Senior Manager Functions, or SMFs. They include the chief executive (SMF1), the chief finance function (SMF2), the chair (SMF9), the compliance oversight function (SMF16) and the money laundering reporting officer (SMF17), among others. There are more than two dozen in total, and which ones apply depends on the type and size of firm. We’ve set them all out in a complete guide to SMF designations.
Three things set these roles apart from ordinary senior hires:
- Approval comes first. The firm must apply to the regulator, and the candidate can’t perform the function until approval is granted. Performing it without approval is a breach.
- Accountability is personal. Each Senior Manager has a Statement of Responsibilities and can be held personally accountable if something goes wrong in their area and they didn’t take reasonable steps to prevent it.
- Fitness and propriety is assessed formally. The firm must assess the candidate as fit and proper, and the regulator makes its own assessment of honesty, integrity, competence and financial soundness.
Where Generalist Searches Go Wrong
None of this is hidden. It is, though, easy to treat as a box to tick at the end rather than something that shapes the whole search. In my experience, these are the points where SMF searches most often come unstuck.
1. The shortlist isn’t approvable
A candidate can be excellent at the job and still be a weak application. A strong compliance manager who has always supported an SMF16, but never held the accountability, may struggle to show the regulator they are ready. A finance director from an unregulated business may be a brilliant operator with no experience of prudential reporting. The shortlist has to be built around approvability from day one, not filtered for it at the end.
2. Regulatory references arrive late
Regulated firms must obtain regulatory references covering the last six years of a candidate’s employment history before applying for approval. These references include specific questions about disciplinary action and conduct breaches. If something surfaces at this stage that wasn’t disclosed at interview, the hire can collapse after the offer has been accepted. Raising these questions early, and in the right way, protects everyone.
3. The timetable is unrealistic
A client who expects their new MLRO to start the day after their notice period ends is likely to be disappointed. The regulator has a statutory period to decide an application, and more complex or high-impact roles can take longer, especially if questions are raised or an interview is needed. Candidates sit in an exposed limbo while they wait, which is when counter-offers land. Managing that gap is part of the job.
4. The role itself isn’t clearly defined
Some firms come to market without being sure which SMF the role is, or whether one person should hold two functions. That uncertainty leads to vague job descriptions, the wrong candidates and an application the regulator questions. Getting the designation and the Statement of Responsibilities right before the search starts saves weeks.
5. Pay is benchmarked against the wrong market
SMF roles carry personal regulatory risk, and experienced holders know it. Pay for an approved compliance officer or MLRO often sits above a comparable unregulated role, and interim and fractional day rates reflect scarcity. We publish our own view of what SMF roles actually pay because so many offers fail on this point.
Why Fractional and Interim SMFs Are Growing
One of the clearest trends we see is demand from smaller firms for fractional and interim Senior Managers. A small wealth manager, payments firm or consumer credit lender may need an approved compliance officer and MLRO but can’t justify, or find, a full-time hire. Experienced SMF holders increasingly work for two or three firms at once, or step in on an interim basis when someone resigns unexpectedly.
This creates a very different kind of search. The candidate needs the approval track record, the judgement to manage more than one firm, and the availability to respond quickly when something goes wrong. The client needs to understand the regulator will look closely at whether a part-time arrangement gives enough oversight. It’s a growing market, and one where general recruiters who don’t know the regime can find themselves out of their depth quickly.
What Any Recruiter Can Take From This
Even if you never run an SMF search, financial services clients increasingly expect recruiters to understand the regulatory side of senior hiring. A few habits make a real difference:
- Ask early whether the role needs regulatory approval or sits under the Certification Regime, and plan the timetable around it.
- Ask candidates about regulatory history, past directorships and anything that might appear on a reference before you present them, not after.
- Check whether the candidate has held the accountability, not just worked alongside it.
- Help the client be realistic about the time between offer and start date.
- Know when a role is beyond your specialism, and say so. Clients respect that more than a failed search.
Sharing What We Know
When we launched SMF Capital, we decided to publish as much as we could. The site now has detailed guides to each Senior Manager Function, the Conduct Rules, the Certification Regime, regulatory references and the fit and proper test, along with free downloadable templates for a Statement of Responsibilities, a responsibilities map, a fit and proper assessment, a regulatory reference checklist and a board skills matrix. They’re all on our free guides page, and recruiters are as welcome to use them as firms are.
We also run regular events and a podcast for people working in regulated firms, and we list live SMF and senior compliance roles on our jobs page.
Final Thought
The Senior Managers regime has changed what “senior hire” means in financial services. The question used to be whether a candidate could do the job. Now it’s whether they can do the job, be approved to do it, and carry the personal accountability that comes with it. Recruiters who understand that distinction will win more of this work. Those who don’t will keep finding out about it after the offer has been made.
If you’re working on a regulated senior hire and want a second opinion, or you have a client who needs an approved Senior Manager, I’m always happy to talk.
About the author: Adrian Lawrence FCA is the founder of SMF Capital, which specialises in Senior Manager Function recruitment for FCA and PRA-regulated firms. He is a Chartered Accountant and Fellow of the ICAEW, a former listed-company Finance Director, and founder of FD Capital and The Capital Recruitment Group. He leads every SMF Capital search personally.