Pillar 3

Independent Advice Ltd

Capital Resources Directive
Basel II – Pillar 3 Disclosure
This document was prepared September 2016

      1. Introduction
      2. Risk Management Policies and Objectives
      3. Structure of Risk Management Function
      4. Capital Resources
      5. Integration into Business Strategy
1. Introduction

Independent Advice Ltd (the firm) is classified as BIPRU Limited Licence €50k firm and, as such, is required to comply with the three Pillars of Basel II (the Capital Requirements Directive). The three Pillars that make up the Capital Requirements Directive are set out below.

  • Pillar 1 – Minumum Capital Requirements
  • Pillar 2 – Internal Capital Adequacy Assessment Process (ICAAP) and Supervisory Review and Evaluation Process (SREP)
  • Pillar 3 – Disclosure

This document is designed to satisfy the requirements of Pillar 3 by setting out the firm’s risk management objectives and policies.

The aim of Pillar 3 is to encourage market discipline by developing a set of disclosure requirements for investment firms and credit institutions that will allow other market participants to access key pieces of information on a firm’s capital, risk exposures and risk assessment processes. the disclosures are to be made public for the benefit of the market.

  • The firm does not use the IRB Approach when calculating its Credit Risk Component.
  • The firm is not subject to consolidated supervision.
  • All figures in this document are correct as September 2014 unless stated otherwise.

2. Risk Management Policies and Objectives

The firm acts as a wealth manager offering independent financial advice and investment services on both advisory and discretionary basis.

Where possible, the firm will attempt to manage all the risks that arise from its operations. As the firm is a BIPRU Limited Licence €50k firm it is not usually exposed to Credit Risk, Market Risk (including interest rate risk) or Operational Risk. Nevertheless, the firm has separately considered the risks associates with its business.

The ways in which the firm manages the risks faced include producing key risk information and indicators to measure and monitor performance. The directors personally monitor and control specific risks.

  • The firm is not currently exposed to Market Risk, Position Risk, Foreign Exchange Risk, Counterparty Risk or Large Exposures resulting from the same, as the firm is not authorised to and does not Deal as Principal or underwire new issues of securities.
  • The firm has potential Credit Risk arising from clients. However, in practice the firm’s fees are invoiced to and settled directly from clients or by third party settlement against a clients investments held upon a platform. As a result the firm has virtually no credit risk exposure.
  • The firm is highly unlikely to have any significant exposures to any client or third party.
  • The firm is not subject to Consolidated Financial Reporting.
3. Structure of Risk Management Function

Independent Advice Ltd is a small firm with 7 employees of which two are directors. The directors hold bi-monthly meetings to review and identify any new risks and monitor previously identified risks.

3.1 Risk Reporting and Management Systems

There are a number of reports and processes that are employed by the firm to enable key risks to be identified, reported to the directors for consideration and, where required, actioned and managed. These may include:

  • Compliance Risk Assessment – This is an assessment of all relevant risks that the firm is likely to face in the next twelve months and is performed on an annual basis. the report is reviewed and approved by the directors and is used as the basis for the firm’s compliance monitoring for the following period. A director attends all local FCA business risk awareness workshops and where possible FCA compliance workshops.
  • Compliance Resource Assessment – This assessment determines the level of internal compliance resource required by the firm for the period covered by the compliance risk assessment and will identify shortfalls in resourcing that could lead to compliance weakness and breaches. This is performed annually by the directors. The outcome of the review dictates how much third party compliance work is brought it. The firm expects additional resources are required mainly for variations in permission or due to future regulatory change.
  • Anti Money-laundering Risk Assessment – A forward looking annual assessment of the risks the firm faces from money laundering and wider financial crime. The MLRO will use this assessment to drive the necessary anti-financial crime initiatives within the firm.
  • Compliance Oversight Officer’s Report – An annual consideration of the standard of the firm’s governing body for consideration and action as necessary.
  • MLRO Report – An annual consideration of the standard of the firm’s anti-money laundering and other financial crime practices over the preceding year, The report is presented to the firm’s directors for consideration and action as necessary.

4. Capital Resources

The firm’s capital resources comprise entirely share capital and reserves.
Our Tier 1, Tier 2 and Tier 3 capital at 5th September 2016 is as set out below:

Tier 1 Capital (£000’s)
Gross Deductions Net
£726 £nil £726
Tier 3 Capital (£000’s)
Gross Deductions Net
£nil £nil £nil
Total Capital Resources (£000’s)
Gross* Deductions Net
£726 £nil £726


5. Integration into Business Strategy

It is the intention of the firm to maintain sufficient capital resources to allow it to continue to operate profitably in the private wealth management sector and to provide a reasonable return for the shareholders of the firm. In order to maintain this capital the firm must generate and retain profits that will add to the firm’s financial reserves.

Internal Capital Adequacy Assessment Process (“ICAAP”)

The ICAAP combines Pillar 1 and Pillar 2 requirements and involves a detailed analysis of the various elements of the business to understand the need for capital in the forthcoming period. Various models are tested in the process to identify areas where additional capital may be required to manage the risks to which the firm is exposed.

The result of the ICAAP is challenged by a party independent of the preparation of the ICAAP and this is ultimately reviewed and approved by the directors to ensure that there is sufficient capital within the firm to meet our future plans and anticipated risks.

The firm considers it needs no further capital resources to meet any identified Pillar 2 requirements.