Pillar 3 Disclosure



The European Union Capital Requirements Directive introduced standards in the EU for capital adequacy based on the assessment of risk, together with an associated supervisory framework and disclosure requirements. The Capital Requirements Directive is implemented in the UK through rules and guidance enforced by the Financial Conduct Authority (“FCA”).


Scope & Basis of Disclosures 

This is a Pillar 3 disclosure made in accordance with the UK Financial Conduct Authority (“FCA”) Prudential Sourcebook for Banks, Building Societies and Investment firms (“BIPRU”) which is required to be made on an annual basis. The disclosures are subject to external verification only to the extent that they have been drawn from the Firm’s Financial Statements for the year ended 31st December 2017. This document is intended to provide adequate public disclosure of the approach undertaken by Best Practice IFA Group to manage risk and capital adequacy.


The FCA’s rules provide that we may omit one or more of the required disclosures if we believe that the information is immaterial. As this document has been produced solely for the purposes of providing information on the capital adequacy and risk management of Best Practice, any disclosure requirements which do not apply have not been included.


Capital Requirements Directive

The Capital Requirements Directive consists of three ‘Pillars’:

  • Pillar 1 establishes minimum capital requirements in respect of credit, market and operational risk exposures using standard criteria.
  • Pillar 2 requires firms to assess the risk exposures specific to their business and to calculate the amount of capital that should be held against these exposures.
  • Pillar 3 requires firms to publicly disclose their policies for managing risk and their capital requirements. This is designed to promote market discipline by providing market participants with key information on a firm’s risk exposures and risk management processes.


Risk Management

Risk Appetite

Best Practice recognises that risk taking is an essential part of doing business and therefore does not necessarily need to be, and cannot always be eliminated. Risks must be fully understood and adequately measured to ensure that the business’ risk exposure is appropriate, and is consistent with our strategic objectives and consumer outcomes. The Board of directors is responsible for setting out Best Practices’ risk appetite and this is reviewed at least annually to ensure that they remain appropriate to Best Practices’ risk profile and strategic objectives.

We will at all times aim to maintain enough capital to exceed minimum capital adequacy requirements, as the business is managed with an aim to mitigate risk exposure for the business.

As part of the commitment to treat our customers fairly and manage the company with appropriate due diligence and effective governance, an ongoing consideration of the risks affecting the business is undertaken. The purpose is to identify the potential factors that could impact on the ability to treat consumers fairly, provide adequate protections for clients and promote reassurance for transacting business. In addition, there is an underlying need to safeguard the interests of the company and uphold the principles for business, financial crime prevention and confidence in the financial services sector.


Risk Management

In addition to regular reviews, Best Practice has a number of procedures in place to evaluate and manage potential risks to the company including (but not limited to) business continuity, data security measures, stress-testing procedures, contingency funding for capital adequacy and the group business plan.

In addition, Best Practice utilises a Business Risk Committee that monitors, assigns ownership, mitigates risk and reports to the Board of Directors. This is a key tool in the overall identification, measurement and mitigation of risk. There are variously appointed sub-committees that are assigned their own specific risk areas to monitor and mitigate. The sub-committees then report into the Business Risk Committee for overall visibility, monitoring and raising to Board of Directors.


ICAAP Adequacy & Reviews

Best Practice Group gives the highest priority to ensuring the continual delivery of services to our clients during challenging periods. Business Continuity is seen as the activities that maintain and recover business operational effectiveness against any untoward or adverse circumstances. 

Threats to the survival and growth of the business can come in many different forms and the purpose of this document is to set out an understanding of those threats and the prescribed responses to them. The risks themselves are identified in the risk summary section. Each threat is evaluated by means of a Risk Assessment. 

The scale of each perceived potential impact on the business has been considered, taking parameters such as the likely degree and duration of the disruption and the potential financial consequences. The goal is for all services to continue normally for the duration of any disruption. 

The key business processes and their respective objectives are listed within this document.  These procedures are designed to specify what internal actions are needed for the business to be able to provide services in response to any given threat materialising.  The relevant Disaster Recovery Action Plans and Procedures within this document detail how Best Practice Group will respond in the event of so-called “disasters”, while the wider Business Continuity Plan sets out how the Group seeks to avoid or mitigate against the impact of such potential events. 

Both the individual disaster recovery plans and the business continuity approach depend centrally on key people and effective communication to restore normal services.

If services fall below pre-defined levels for more than a pre-defined minimum acceptable duration, this constitutes what is commonly referred to as a crisis or disaster – this plan adopts the use of the word incident to reflect the differing levels of seriousness of these events. Disaster recovery is taken to mean those activities recovering IT and other infrastructure from interruptions.  In this plan, an interruption to services is deemed to be anything which degrades or disrupts those activities and the facilities necessary to maintain delivery of Group services.

Best Practice Group’s aim is to plan to avoid altogether, or mitigate potential threats to the extent that it is deemed reasonable, practical and commercially viable, which is borne out of a duty of care to both consumers and staff alike. 

Where threats materialise into inconveniences, interruptions or full scale incidents, this plan sets out the steps needed to be taken by the Group’s management to recover / resume normal services. The relevant business continuity procedures contained within this plan will be invoked by the Compliance Director and managed by that individual through the recovery process.

Details of the material risks listed in the FCA General Prudential Sourcebook and the firms’ tolerance level towards them are detailed below.


Risk Area and Approach to Risk

Credit Risk (None) - No risk exists as no debt based investments are held by the company.

Market Risk - Market risk is applicable to all forms of investment; however the exposure to values decreasing significantly on the basis of changing market conditions has limited potential relative to mainstream investment products or funds. Appropriate diversification is employed to mitigate the possible effects of market risk. 

Liquidity Risk - The business currently has no material liquidity risk, but we do recognise this as a moderate risk to the business which is mitigated through the holding of freely available assets to cover at least 6 months of total fixed overheads. 

Operational Risk - The risk from failed internal controls is again always apparent. The structure of Best Practice is as a service based company with well-defined company procedures and plans, all of which have been subject to external consideration. The company is protected via professional indemnity insurance and undertakes external and independent audits on an annual basis to consider procedural effectiveness. Additionally, the business maintains engrained levels and routes of escalation where issues are identified.

Insurance Risk - The Firm maintains Professional Indemnity insurance and Office Insurance for the benefit of the firm. The policies, which are in market standard terms, cover the most likely sources of loss to the Firm to a level that is proportionate to the scale of the Firm’s business. The policies are underwritten by insurers with satisfactory credit ratings. In the event that any of these policies do not pay out as soon as anticipated, the Firm’s existing regulatory capital resource requirement (which is based on its Fixed Overhead Costs) and its access to additional capital from its members mean that the Firm is in a position to continue to operate. In the event that a particular loss falls outside the terms of its insurance, the Firm’s management will, where appropriate, make provision in the ordinary course of business for such potential losses as soon as is prudent. Having considered the policy excesses, no additional capital has been allocated under the ICAAP to cover an exposure the Firm may face outside the fixed overhead costs taken into account in its regulatory capital resource requirement.

Concentration Risk - Not applicable as the firm does not have any exposure to third party debtors or counterparties.

Residual Risk - Naturally residual risk remains despite planning undertaken. Whilst independent in its own right, Best Practice is benefitted by the close association to the other subsidiaries of its parent company Benchmark Capital. This association may remain non-committal on any funding obligation but the sole-ownership of the companies would allow the ability to provide financial support if needed and thus greatly reduce the impact of residual risk or any actual effects realized.

Securitisation Risk - Not applicable as no debt security used for company reserves and consequently no pooling of these arrangements.

Business Risk - Having the potential to not follow a planned business strategy remains possible at any time. The flexibility held by Best Practice in resisting contractual obligations with third party firms and not having dictated terms of trade enables a clear direction to be applied and followed. To ensure that the business plan is not deviated from, an annual review of the company’s performance is carried out against the underlying objectives. This allows for identification of changing direction, which may result in amended strategy or corrective measures, but it does offer an awareness of any changes apparent to limit the impact of business risk.

Interest Rate Risk - Not applicable as no bond stock held to be affected by interest rate increases on capital value.

Pension Obligation Risk - Best Practice Group does not operate a defined benefit pension scheme therefore has highly limited exposure in this regard due to not being at risk of under-funding, being required to increase contributions or being affected by assumption risk. As the company is not publically traded, there is also no accountability to investors.

Group Risk - Best Practice is part of the Benchmark Capital group of companies and the Board of Directors treat each subsidiary as independent from each other for the purposes of Capital Requirements. All transactions between the group are conducted on an arm’s length basis, and stress tested for liquidity on their own merits. Regular reviews of transactions and conduct are undertaken to ensure that independence remains between the firms.


Remuneration Policy


Best Practice IFA Group Limited has identified those employees who are deemed to be Code Staff with reference to their managerial and influence on the company’s overall risk profile of the FCA regulated business.

These comprise of:

1.       Directors and senior managers

2.       Other Code staff with control functions as deemed appropriate

Our remuneration policy is reviewed by the Board of Best Practice IFA Group Limited.

Best Practice operates a competitive remuneration structure relative to employee’s role and seniority. Best Practice has a bonus scheme in place and is based on the company’s financial performance and individual achievements. The aim of the scheme is to provide fair, competitive pay that rewards firm and employee performance and to create a culture of ownership where employees are rewarded for their contributions. Excessive risk taking is not rewarded. Bonuses are limited to 20% of basic annual salary.

The aggregate annual quantitative information on remuneration of our Code Staff, of which we have 6 employees and Directors as at 31 December 2017.

Directors                     £183,268

Senior Management   £168,516

This is comprised of non-deferred fixed salary, non-contributory pension and benefits in kind. There were no payments of variable pay or share plan related remuneration.


Capital Requirements

Tier 1 Capital

Share Capital £1,000

Retained earnings and other reserves £1,883,418

Total £1,884,418

Deductions for Tier 1

Intagible Assets: £0

Total: £1,884,418


Tier 2

Revaluation reserve: £0

Total: £1,884,418

Tier 1 and Tier 2 Capital


Best Practice IFA Group

Holmwood House
Broadlands Business Campus
Langhurstwood Road
Horsham, RH12 4QP
Contact us

For new sales enquiries, please call 01403 334411

For all other enquiries, please call 01403 334455