Financial Services – Non-Executive Recruitment

Financial Services NED Recruitment

Financial services board appointments are the most heavily regulated non-executive roles in the UK. Under the Senior Managers and Certification Regime (SMCR), a chair or committee chair at a regulated firm is personally accountable to the regulator. In many cases they need regulatory approval before they can take their seat. A search that treats a financial services INED role like any other non-executive director recruitment exercise is likely to produce a candidate who either struggles to get approved or cannot add what the board actually needs.

NED Capital runs financial services searches with the regulatory dimension built in from the start. Searches are run by our senior search team, each with at least ten years in senior-level recruitment, under founder Adrian Lawrence FCA, a Fellow of the ICAEW. We assess SMF suitability, independence and prior regulated board experience before any candidate reaches your shortlist.

If you are new to the requirements, our guide to appointing a NED for an FCA-regulated firm explains the process step by step. Our FCA and SMCR INED appointments page covers the designated roles in more depth.

Call 0203 137 2496 or email recruitment@nedcapital.co.uk to discuss a financial services NED appointment.

The SMCR and Financial Services Board Appointments

The Senior Managers and Certification Regime was introduced for banks and building societies in March 2016. It was extended to insurers in December 2018 and to FCA solo-regulated firms in December 2019. It replaced the old Approved Persons Regime with a framework built on individual accountability. Each senior manager holds a defined set of responsibilities and can be held personally to account if things go wrong in their area.

For non-executives, the regime matters in two ways. First, certain board roles are themselves Senior Management Functions (SMFs). The person must be approved by the regulator before taking up the role. Second, all non-executives at regulated firms are subject to the conduct rules, whether or not they hold an SMF. A non-executive who does not understand how the regime works is a governance risk in their own right.

The Designated Non-Executive Roles

The non-executive SMFs are:

• SMF9 — Chair. The chair of the governing body. This is the most senior non-executive role in a regulated firm and is accountable for leading the board and its oversight of the firm. See our dedicated page on SMF9 non-executive chair appointments.
• SMF10 — Chair of the Risk Committee. Leads the board’s oversight of risk appetite, the risk management framework and the work of the Chief Risk Officer.
• SMF11 — Chair of the Audit Committee. Leads oversight of financial reporting, internal controls, internal audit and the external audit relationship. Our SMF10 and SMF11 committee chair page covers both roles.
• SMF12 — Chair of the Remuneration Committee. Leads the firm’s remuneration policy and its compliance with the relevant remuneration codes.
• SMF13 — Chair of the Nomination Committee. Leads board composition, succession and the assessment of the board’s collective skills.
• SMF14 — Senior Independent Director. Acts as a sounding board for the chair and a channel for concerns that cannot be raised through the usual routes. See SMF14 senior independent director appointments.

Which of these apply depends on the type of firm. Dual-regulated firms (banks, building societies, insurers and the larger investment firms regulated by the Prudential Regulation Authority) designate the full range. Among FCA solo-regulated firms, core firms designate only the chair as an SMF. Enhanced firms also designate the committee chairs and the senior independent director. Non-executives who do not hold an SMF are generally known as notified NEDs. They do not need pre-approval, but they remain bound by the conduct rules, and the firm must still be satisfied that they are fit and proper.

Regulatory Approval and Fitness and Propriety

An SMF candidate must be approved by the FCA, and by the PRA where it is the lead regulator, before taking up the role. The regulator applies the tests in the FCA’s Fit and Proper test (FIT): honesty, integrity and reputation; competence and capability; and financial soundness. The firm must take regulatory references from previous regulated employers, and the regulator can and does interview candidates for senior roles. A complete application must legally be decided within three months, but incomplete or poorly prepared applications can take much longer.

This has a direct bearing on how a search should be run. A candidate who looks ideal on paper but carries an unresolved regulatory issue, a gap in their references or a conflict that compromises their independence can delay an appointment by months. In the worst case they can be withdrawn after the board has committed. Our FCA-regulated board governance page covers the board’s wider responsibilities.

What We Assess Before Shortlisting

Every financial services NED candidate is assessed against four areas before we present them.

Regulatory track record. We confirm prior SMF or approved person roles, check the Financial Services Register, and discuss with the candidate anything that might come up in references or in the regulator’s review. Issues are surfaced at the start, not in the final week.

Independence. A financial services INED must be genuinely independent of the executive, the major shareholders and the firm’s key counterparties. We test this against the firm’s ownership, its group structure and the candidate’s other roles, using the same approach set out in our page on independent non-executive director recruitment.

Technical competence for the role. A risk committee chair needs real depth in risk frameworks, capital and liquidity, or the specific risks of the firm’s business model. An audit committee chair usually needs recent and relevant financial experience. Many are chartered accountants, which is why we often run these mandates alongside our audit committee chair recruitment service. A remuneration committee chair needs a working understanding of the remuneration codes and how they apply to the firm.

Time and capacity. Regulated boards are demanding. We check that the candidate’s existing portfolio leaves room for the commitment, including the extra time needed in a crisis, a regulatory review or a transaction. Our guide to how many non-executive roles is too many explains why this matters.

The Firms We Work With

Our financial services work covers the full range of regulated businesses:

• Banks and building societies, including challenger and specialist lenders building or refreshing their board ahead of growth or a capital raise.
• Insurers, brokers and MGAs, where boards need risk, actuarial, claims and conduct expertise alongside commercial experience.
• Asset and wealth managers, including investment trust boards. See our page on investment trust board appointments.
• Payment, e-money and fintech firms, often appointing their first independent directors as they grow. See fintech non-executive recruitment.
• Consumer credit and lending businesses, where the board’s oversight of customer outcomes is under close regulatory scrutiny.

Consumer Duty and the Board

The FCA’s Consumer Duty has made customer outcomes a direct board responsibility. Boards must review and approve an annual assessment of whether the firm is delivering good outcomes for retail customers, and most firms appoint a non-executive as Consumer Duty champion. That has raised demand for non-executives who can challenge product governance, pricing and customer support with real authority. Our article on how non-executive directors should oversee Consumer Duty explains what good oversight looks like.

Corporate Governance Beyond the Regulator

Listed financial services firms must also report against the UK Corporate Governance Code. Its expectations on board independence, committee composition and evaluation sit alongside SMCR. Unlisted firms often adopt parts of the Code voluntarily, particularly where investors expect it. Our guide to how the UK Corporate Governance Code affects non-executive directors sets out the main provisions. Our work on board evaluations and reviews helps boards identify the skills gaps a new appointment should fill.

How a Financial Services NED Search Runs

1. Brief and regulatory scoping. We agree the role, whether it is an SMF, which regulator will review the application and the competencies the board needs. We also agree the timetable, working back from when the person needs to be in post and allowing for the regulatory approval period.

2. Research and direct approach. The strongest financial services non-executives are usually already serving on boards and are not responding to adverts. We map candidates across banks, insurers, asset managers, the regulators themselves, the audit firms and specialist advisory practices, and approach them directly.

3. Assessment. Each candidate is assessed against the four areas above: regulatory track record, independence, technical competence and capacity. We give you a written assessment for each one.

4. Shortlist and interview. You receive a shortlist of candidates who are both suitable and approvable. We coordinate interviews and gather feedback.

5. Regulatory application support. Once you have chosen a candidate, we help coordinate the information needed for the application, including the candidate’s history and references, so the submission is complete first time. The hiring NEDs for financial services boards guide sets out the practical steps.

Fees and Remuneration for Financial Services NEDs

Financial services non-executive fees usually sit above those for comparable unregulated roles, reflecting the personal regulatory accountability and the time commitment. Committee chairs and SMF holders typically receive an additional fee. Our NED salary guide and our article on how non-executive director fees are structured give a fuller picture. Candidates should also check that the firm’s D&O insurance is adequate for a regulated role.

Frequently Asked Questions

Does every NED at a regulated firm need FCA approval?
No. Only those holding a Senior Management Function, such as the chair, committee chairs at enhanced or dual-regulated firms, and the senior independent director, need pre-approval. Other non-executives are notified NEDs. They do not need approval but must meet the conduct rules and be fit and proper.

How long does approval take?
The regulator must decide a complete application within three months. In practice, a well-prepared application for an experienced candidate can be faster, while incomplete applications are often delayed. We plan the search timetable around this.

Can a first-time NED be appointed to a regulated board?
Yes, especially as a notified NED, provided they bring relevant expertise. SMF roles usually call for prior board or senior regulated experience. Our guide to how to become a non-executive director is written for candidates.

Do you work outside London?
Yes. We recruit across the UK from our London and West Midlands offices, including for firms based in Edinburgh, the regions and London.