Hiring Under SMCR: The Executive Roles Firms Keep Getting Wrong

When people talk about hiring in financial services, they usually focus on experience, leadership, and culture fit.But in FCA-regulated firms, there’s another layer entirely — regulatory accountability.And that changes everything.Welcome to today’s episode, where we’re unpacking some of the most misunderstood Senior Management Function appointments under the UK’s Senior Managers and Certification Regime — and why firms are increasingly struggling to hire the right people into these positions.At Exec Capital, we spend a huge amount of time working with boards, founders, and regulated firms navigating exactly these challenges. Today we’re focusing on four particularly important appointments: SMF4 Chief Risk Officer  SMF5 Head of Internal Audit  SMF14 Senior Independent Director  And the increasingly important Fractional MLRO model. Let’s start with SMF4.Segment 1 — The SMF4 Chief Risk OfficerThe role of the Chief Risk Officer has evolved dramatically over the last few years.Operational resilience, Consumer Duty, cyber governance, third-party risk, and DORA-related oversight have all expanded what firms expect from risk leadership. But many firms still approach SMF4 hiring like a traditional executive search.That’s often where problems begin.Under SMCR, the SMF4 holder carries direct regulatory accountability for the firm’s risk framework. In Enhanced firms, this is not optional — the FCA expects clear ownership, robust governance, and evidence that the individual can stand up to regulatory scrutiny. What makes these searches difficult is that experienced SMF4 candidates are selective.They assess governance quality, board engagement, operational resilience maturity, and whether the business genuinely supports second-line independence.Exec Capital’s SMF4 CRO Hiring Guide explains how firms should structure these searches properly — including FCA approval considerations, reporting lines, and the difference between hiring a strategic CRO versus simply filling a regulatory requirement.Segment 2 — Why SMF5 Internal Audit Searches Often StallNow let’s talk about SMF5 — Head of Internal Audit.This is one of the most underestimated governance hires in regulated firms.A strong SMF5 leader doesn’t just manage audit plans.They challenge the board.They test operational resilience frameworks.They review governance effectiveness.And critically, they provide independent third-line assurance across the entire control environment.The problem is that many firms unintentionally compromise the independence of the role before the search even begins.Candidates notice quickly if the audit function lacks authority, budget, or direct board access.Experienced SMF5 professionals expect clear committee engagement, especially with the Audit Chair, and they expect the internal audit function to be genuinely independent from executive management.Exec Capital’s SMF5 Head of Internal Audit Hiring Guide breaks down what regulated firms should actually look for when appointing an SMF5 holder — from qualifications and sector experience through to governance maturity and FCA expectations.Segment 3 — The Growing Importance of the SMF14 SIDOne role that has become increasingly important — especially in governance-sensitive firms — is the Senior Independent Director.The SMF14 SID role is often misunderstood.Some firms treat it as honorary.In reality, the SID becomes critical during periods of board tension, succession planning, regulatory challenge, or concerns involving the Chair.A strong SID acts as a stabilising governance figure.They provide an alternative communication channel for shareholders, support CEO and Chair evaluation processes, and can become central during crisis situations.The best SMF14 candidates are typically experienced non-executive directors with strong regulatory credibility and the confidence to challenge constructively.Exec Capital’s SMF14 Senior Independent Director Hiring Guide explores how firms should think about these appointments strategically — especially as governance expectations continue to rise across regulated markets.Segment 4 — Why Fractional MLROs Are Becoming MainstreamFinally, let’s talk about the rise of the Fractional MLRO.This is one of the biggest shifts happening in regulated hiring right now.Many smaller regulated firms — especially fintechs, payment firms, investment boutiques, and early-stage regulated businesses — simply don’t need a full-time senior MLRO.But they still need experienced financial crime leadership.And they still need credible regulatory oversight.That’s where the fractional model works exceptionally well.An experienced MLRO can provide senior expertise, regulator engagement capability, AML framework oversight, and practical implementation support without the cost structure of a permanent full-time executive.The key, though, is ensuring the arrangement is properly structured.The FCA still expects accountability, clarity of responsibility, and sufficient time commitment.Exec Capital’s Fractional MLRO Guide explains when the model works, where firms get it wrong, and how regulated businesses can build scalable compliance leadership without over-hiring.ClosingThe reality is that SMCR hiring is no longer conventional executive recruitment.Every one of these appointments sits at the intersection of leadership, governance, regulation, and personal accountability.And firms that approach these searches strategically tend to move faster, attract stronger candidates, and avoid costly regulatory mistakes later.If you’re hiring into regulated leadership roles — whether that’s risk, audit, governance, or financial crime — the team at Exec Capital has published a growing library of specialist hiring guides designed specifically for boards and regulated firms navigating these appointments. You can explore the guides directly all of which can be found in our useful knowledge Centre https://www.execcapital.co.uk/knowledge-centre/SMF4 CRO Hiring GuideSMF5 Head of Internal Audit Hiring GuideSMF14 SID Hiring GuideFractional MLRO GuideThanks for listening — and we’ll see you next time.