FSA broadens review into wealth managers’ advice

The Financial Services Authority (FSA) has begun a new phase of its review into wealth management, focusing on client outcomes.

It follows a review of 16 firms last year, in which it found 14 posed a high or medium-high risk of detriment to their customers, based on the number of client files which had a high risk of unsuitability or where the suitability could not be determined.

The FSA sent ‘Dear CEO’ letters to wealth management firms in June 2011, highlighting its concerns and stating it believed the failings could be prevalent in firms outside its sample.

In today’s update, the FSA’s said its thematic work will now also look into firms’ systems and controls and whether they have heeded the regulator’s previous warnings and concerns.

Since last summer, the FSA says it has continued to interact with the 16 firms in its original sample to mitigate the risks identified, principally around record-keeping and/or suitability.

This, it added, has led to enforcement referrals, skilled person’s reports and significant remediation programmes.

It said: “The Dear CEO letter stated that the FSA expects firms to take reasonable steps to ensure that a personal recommendation or a decision to trade is suitable.

“The findings gave rise to concerns that there is an unacceptable risk of clients of wealth management firms experiencing unfavourable outcomes.

“The failings may point to deficiencies in the management and control architecture of firms, so wealth management businesses can expect to see continuing and increasing supervisory focus.”

In today’s update, the FSA said it will continue to interview key individuals from the firms assessed as part of its previous work, to see what action they have taken since then, warning it will consider taking further regulatory action if required.

It will provide further updates on its work next year.


Wednesday, August 29th, 2012 EN

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