FSA’s wealth management review – Dear CEO letter – The FSA has written a letter addressed to wealth management CEOs in which it has identified significant, widespread failings which it is concerned may be prevalent outside the firms it sampled. The FSA is concerned about firms failing to demonstrate suitability for a number of reasons, including:
- • an absence of basic know-your customer information or a reliance on out-of-date information;
- • firms not adequately recognising the risks that their clients were prepared to take, and inconsistencies between portfolios and the client’s attitude to risk, investment objective(s), investment horizon or the agreed mandate; and
- • failure by some firms to implement the Markets in Financial Instruments Directive client classification requirements.
CEOs are reminded of the principle that they must pay due regard to the interests of customers and treat them fairly. They are told that they can expect to see continuing and increasing supervisory focus on suitability (and the ability to demonstrate it) in the wealth management sector.
A copy of the letter is available.
http://www.fsa.gov.uk/pubs/ceo/dear_ceo_wealth_management.pdf
FSA wealth manager review flags advice concerns
The FSA is warning wealth managers to honour their obligations to clients after a review of 16 firms raised suitability of advice concerns.
The review sampled 16 wealth management firms which provide advisory and or discretionary investment management services, predominantly to retail clients.
- Out of 16 firms, the FSA judged 14 to pose 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.
- Four in every five files assessed by the FSA suggested a high risk of unsuitability, while two thirds were either inconsistent with the firm’s in-house risk assessment model or with the client’s attitude to risk (ATR).
- Meanwhile, some information was out of date and, in some cases, the FSA found no record of clients’ financial situation.
- Elsewhere, basic know-your-client documentation was also absent, and some firms were not implementing MiFID client classification requirements.
The findings of the review were described as “serious” and “worrying” by FSA director of conduct policy Sheila Nicoll today at the Chartered Institute of Securities and Investment annual conference.
She said the FSA would conduct follow-up work later this year and take enforcement action against firms found to be putting clients at risk.
“Wealth managers need to look carefully at their processes, records and risk controls to see if they are complying with our rules,” she said told delegates.
The FSA has written to the CEOs of wealth management firms outlining its concerns, and describing the failings as “significant and widespread”.
In a warning shot to other wealth managers the FSA letter states it it “concerned” the failings “may also be prevalent in firms outside our sample”.
Chief executives must acknowledge they have read and understood the letter and considered the implications for their firm, and submit a response to the FSA by 9 August 2011 to wealthmanagement@fsa.gov.uk
Read more: http://www.ifaonline.co.uk/ifaonline/news/2078688/fsa-wealth-manager-review-flags-advice-concerns#ixzz1PKNkLsOO
IFA Online – News, blogs and analysis for IFAs. Visit the website now.
Loading...