The Investment Firms Prudential Regime (IFPR) is the FCA’s new prudential regime for MiFID investment firms which aims to streamline and simplify the prudential requirements for UK investment firms. IFPR came into effect on 1st January 2022, and its provisions apply to Wren Investment Office Limited (or the firm) as an FCA authorized and regulated firm.
The public disclosure requirements of IFPR are set out in MIFIDPRU 8, replacing the previous Pillar 3 requirements under BIPRU 11.
Wren Investment Office Limited is classified as an SNI firm given it does not breach any requirements set out in MIFIDPRU 1.2.1 R.
Wren Investment Office Limited is required to disclosure the following information:
The firm’s approach to remuneration uses fixed and variable remuneration to ensure talent is retained by the firm. Fixed remuneration is based on individual performance, internal promotion and market benchmarking. Variable components of remuneration are entirely discretionary and do not link to individual financial targets but rather the performance of the business in line with the firm’s financial forecasts and other non-financial criteria. Variable remuneration is agreed at year end once the firm’s financial results for the relevant period are largely known. The amount of variable remuneration paid takes into account the business performance and the individual going above and beyond their set objectives. Employee variable remuneration is a bottom-up approach based on a percentage of fixed remuneration. Management bonuses are based on a top-down approach as a percentage of prior year profits minus additional capital requirements and investment budget.
1.2.1. Governance arrangements
Due to the size of the Firm, the Management Body holds responsibility for remuneration. The Management committee is responsible for decisions regarding remuneration, taking into account the long-term interests of the Firm, it’s shareholders and other stakeholders, and the public interest.
The Firm recognises that conflicts can arise where employees are responsible for determining the remuneration of their own business areas, however the scale of the firm means that this may be unavoidable. The Management Body is responsible for determining all remuneration packages across the company with approval for their own remuneration sought from others members of the Management Body.
There is no fixed weighting of the financial measures versus the non-financial measures as the Management Body retains discretion on how to adjust variable remuneration awards, however the firm principally bases the assessment of financial performance of the Firm on profits, adjusted for current and future risks. Where there is negative financial performance of the Firm, then total variable remuneration will be considerably smaller, both for current remuneration and reductions in payments of variable compensation previously earned.
Current and future risks have a capital allocation against them where this is appropriate as decided by the management committee and reviewed by the Board. Any variable remuneration is considered once future cash flows, capital requirements and liquidity have been considered.
Total compensation is defined by the Management Body – taking into account revenue, profitability, liquidity and capital. The individual allocations of fixed and variable compensation is based on progress through qualifications, market benchmarks, career trajectory, retention of talent and internal promotions.
The Firm offers additional incentives in the form of variable compensation for all staff. Variable compensation is not to be granted until specific revenue targets have been met. Variable compensation terms differ depending on the role and seniority of the employee and take into account the quality of services provided to customers as well as revenue targets being achieved. The firm monitors the quality of service provided to customers throughout the year and formal discussions are held with employees on at least an annual basis. Any variable compensation received is on a discretionary basis.
To avoid conflicts of interest, variable compensation is not linked solely to sales or volumes but determined by the employee’s performance against set objectives which will take into account a number of different factors including a good standard of compliance, treating customers fairly and quality of services to clients.
In order to promote effective risk management and discourage risk taking that exceeds tolerated levels as well as encourage behaviours in line with the business strategy, objectives, values and long-term interests of the Firm, the Firm considers the following when awarding variable compensation:
1.2.3. Components of variable remuneration
Variable remuneration awards are all paid through the firm’s payroll, in cash, following the finalization of the award.
The table below sets out the fixed versus variable remuneration paid by the firm during the year ended 31 December 2022.
|Fixed remuneration||Variable remuneration|