Our Pillar 3 Statement

Wealthify Limited 2021 Pillar 3 and Remuneration Code Disclosure
FCA Reference Number: 662530 

1. Background

The European Union’s Capital Requirements Directive (“CRD”) came into effect on 1 January 2007 and introduced a set of regulatory capital adequacy standards and associated supervisory framework across the European Union.  Within the United Kingdom, this is governed by the Financial Conduct Authority (“FCA”) in its regulations through the General Prudential Sourcebook (“GENPRU”) and the Prudential Sourcebook for Banks, Building Societies and Investment firms (“BIPRU”).

The CRD framework consists of a three “Pillar” approach:

• Pillar 1 establishes minimum capital requirements, defines eligible capital instruments, and prescribes rules for calculating risk weighted assets;
• Pillar 2 requires banks and investment firms to have an Internal Capital Adequacy Assessment Process (“ICAAP”) and requires that regulatory supervisors evaluate each firm’s overall risk profile as well as its risk management and internal control processes; and
• Pillar 3 encourages market discipline through a prescribed set of disclosure requirements which allow market participants to assess the risk and capital profiles of banks and investment firms.

The requirements for Pillar 3 disclosures are detailed in the FCA Handbook of Rules and Guidance under BIPRU 11.

 

2. Disclosure

The rules in BIPRU 11 provide that a firm may omit one or more of the required disclosures if it believes that the information is immaterial. Materiality is based on the criteria that the omission or misstatement of material information would be likely to change or influence the assessment or decision of a user relying on that information for the purposes of making economic decisions.

The firm is also permitted to omit one or more of the required disclosures where it’s believed that the information is regarded as proprietary or confidential. Proprietary information is that which, if it were shared, would undermine the firm’s competitive position. Information is considered to be confidential where there are obligations binding the firm to confidentiality with its clients and counterparties.

If Wealthify have omitted information for any of the above reasons, a statement explaining this will be provided in the relevant section.

The Pillar 3 disclosure will be reviewed on an annual basis as a minimum. The disclosures will be published as soon as is practical following the finalisation of the ICAAP and the publication of our annual reports. The information contained in this disclosure has not been audited by our external auditors and does not constitute any form of financial statement.

All figures contained in this disclosure are based on our Board approved ICAAP report of 29th November 2021.

 

3. Firm Profile

Wealthify Limited (“Wealthify”) is a wholly owned subsidiary of Wealthify Group Limited. Wealthify provides discretionary investment management services and is authorised and regulated by the FCA and is categorised as a limited license firm for capital adequacy purposes.

Aviva Group Holdings Limited is the 100% shareholder of Wealthify Group Limited.

 

4. Risk Management

Wealthify is governed by its directors who determine its business strategy and risk appetite. They are also responsible for establishing and maintaining the governance arrangements along with designing and implementing a risk management framework that recognises the risks that our business faces.

The directors also determine how the business risks may be mitigated and continually assess the arrangements to manage those risks.  The Board of directors meet on a regular basis and discuss current projections for profitability, cash flow, regulatory capital management, and business planning and risk management.

They manage Wealthify’s risks though a framework of policy and procedures having regard to relevant laws, standards, principles and rules (including principles and rules of the FCA) with the aim to operate a defined and transparent risk management framework. These policies and procedures are updated as required.

Areas of risk to which Wealthify are exposed include credit risk, market risk, operational risk and liquidity risk.

• Credit Risk
  Wealthify does not extend credit to its clients.  Revenue is gained from annual management fees received from clients based on a percentage of assets under management. These charges are made directly to the clients’ portfolios therefore the credit risk relating to this income is negligible.

• Market Risk
  We are indirectly subject to market risk as a significant element of income is dependent upon the value of client assets under management. This risk is mitigated by the asset allocation strategy adopted, which ensures that clients have highly diversified portfolios with limited exposure to any one asset class. Accordingly, exposure to market risk is considered minimal.

• Operational Risk
  Operational risk is defined as the potential risk of financial loss or impairment to reputation resulting from inadequate or failed internal processes and systems, from the actions of people or from external events.
  
  Major sources of operational risk include IT security, internal and external fraud, outsourcing of operations, implementation of strategic change and regulatory non-compliance.}
  
  Wealthify operates a robust risk management process which is regularly reviewed and updated by the Board. Compliance have oversight and are responsible for the periodic reviews and recommending any changes to the Board.
  
  All senior management will bear responsibility for internal controls and the management of business risk as part of their accountability to the Board. Individuals are responsible for identifying the risks surrounding their work, implementing controls over those risks and reporting areas of concern to their line manager.
  
  Wealthify analyses its operational risk within the context of its risk management framework. This brings together an analysis of all possible risks that can have an effect on its business and considers the interconnectivity of those risks. We have identified a number of operational risks, which have been mitigated with systems and controls. The residual risks are perceived as low.

• Liquidity Risk
  Wealthify maintains sufficient surplus cash to meet its working capital requirements and other immediate requirements that can reasonably be foreseen. This is supported by a robust budgeting and forecasting process which has the full involvement of the Board. The risk that the business will be unable to meet its financial obligations as they fall due is not considered material for the purposes of this disclosure. 

 

5. Capital Resources

5.1 Pillar 1
In accordance with the FCA handbook GENPRU 2.1.45R, which provides the calculation of variable capital requirement for a BIPRU firm, our capital requirement has been determined as being our fixed overhead requirement and not the sum of our credit risk capital requirement and our market risk capital requirement.

The Pillar 1 capital requirement for Weathify is £1,279,750.

5.2 Pillar 2
The capital required under Pillar 2 is capital held to cover risks not considered within Pillar 1. 

Wealthify’s overall approach to assessing the adequacy of its internal capital is set out in its ICAAP.  The ICAAP involves consideration of a range of risks we face and determines the level of capital needed to cover such risks. 

The level of capital required to cover identified risks is a function of their impact and probability and risk mitigation controls in place.  Wealthify’s Pillar 2 capital requirement, which is our own assessment of the minimum amount of capital that we believe is adequate against the risks identified, has been assessed as lower than our Pillar 1 requirement. There is a considerable surplus of reserves above the capital resource requirement deemed necessary to cover the risks identified.

Stress and scenario tests performed during the ICAAP support management’s view that adequate capital is held by the firm under Pillar 2.

5.3 Regulatory Capital
Wealthify’s capital resources for regulatory purposes vs the ICAAP capital requirement is confirmed below:

Total Tier 1 and Tier 2 capital resources, net of deductions	£5,150,000
Pillar 1 capital requirement	£1,280,000
Pillar 2 capital requirement	£0

6. Remuneration Code Disclosure

The objective of the FCA’s Remuneration Codes is to ensure that all regulated firms have risk-focussed remuneration policies which are consistent with and promote effective risk management and do not expose the firms to excessive risk.

• Remuneration Committee
  Wealthify has a Remuneration Committee comprising of company directors who have the responsibility of setting the Remuneration Policy, which is aligned to that of Aviva.
  
  Decisions over remuneration considers relevant legal and regulatory requirements, including the FCA’s rules and guidance concerning conflicts of interest and senior manager systems and controls under the SYSC handbook, as well as the UK Corporate Governance Code.

 

• Pay and Performance
  Competitive salaries form the basis of our remuneration package. In addition, there is an element of variable pay for all staff which is based on firm wide and individual performance and comparison against the market rate. Whilst most of the variable reward components are awarded to employees across the business, the structure, balance and amounts may differ.
  
  When assessing individual performance, we use a robust performance review process, which includes qualitative criteria and compliance with the company policies and procedures.

 

• Aggregate Quantitative Information on Remuneration
  We are subject to data protection legislation when disclosing remuneration information. Such legislation prohibits disclosing information that will result in individual information being easily identifiable. Remuneration disclosures will therefore be made on a limited basis in terms of any publicly or Company-wide circulation. However, all necessary information will be made available to a regulatory authority on request.