Of relevance to:
Firms providing discretionary and/or advisory portfolio management services
Suitability in Wealth Management: Further FCA Visits
An article in Regulatory Roundup 71 (pdf) drew attention to a thematic review (TR15/12) that the FCA had published on wealth management firms and private banks concerning the suitability of investment portfolios.
The review assessed 150 files from 15 firms and, whilst some improvement had been identified (over the past six years the Regulator has completed three separate phases of work in this area, culminating in the publication of TR15/12), the comment was made that many of the sampled firms “still need to raise their standards – in some cases substantially …”.
There were two key messages arising from the publication:
- Firms should take note of the findings and ensure that they are able to demonstrate how the portfolios they manage are suitable; and
- Senior management are expected to consider whether any of the concerns raised are reflected in their own firms’ practices and to take any necessary action.
The FCA’s May edition of ‘Regulation round-up’ revisits the findings within the thematic review as a “Hot topic”. The article advises that the FCA now expects all firms to take the findings on board and to consider how they can consistently demonstrate suitability across their clients’ files – taking the necessary steps when any shortcomings are identified.
By way of encouragement, the FCA comments that it is preparing to “visit a number of firms” at the end of the year to see what action they have taken. We are promised that this will remain a focus of the FCA’s work until firms across the sector can demonstrate that they are delivering suitable investment portfolios.
Those firms that still have consideration of the findings in TR15/12 on the “to do” list should take heed of this FCA Regulation round-up article and consider what steps need to be taken. Without a doubt, after both the publication of a thematic review publication and a ‘hot topic’, any firm on the receiving end of one of the promised visits that is found wanting in the area of “suitability” – or, worse still, hasn’t made an attempt to meet the FCA’s expectations – can be sure of some form of punitive action by the Regulator.
How can we help?
Aside from being able to offer a complete range of services to wealth management firms, Complyport has specialist expertise in business conduct, including ‘suitability’ (COBS 9). Complyport has experience of undertaking Skilled Persons Reviews (“s166”) and is proud to be a member of the FCA’s Skilled Person Panel specifically for ‘Conduct of Business’. If we can be of assistance to you in your review of ‘suitability’ and its associated processes then do please contact us at firstname.lastname@example.org