FSA in fresh probe into wealth management services
Regulator says it is interested to see if warnings in previous Dear CEO letter have been heeded by firms.
The Financial Services Authority has launched a fresh probe into wealth management services being offered across the intermediary market in a follow up to a previous investigation that prompted warnings over potential consumer detriment last year.
In June 2011 the regulator published a Dear CEO letter that had been sent to executives of firms that offer wealth management services to retail clients, highlighting a piece of thematic work that had uncovered “widespread failings”.
Since then the FSA said it has continued to interact with those firms “to mitigate the risks identified, principally around record-keeping and/or suitability”.
The watchdog said this has led to enforcement referrals, skilled person’s reports and significant remediation programmes. In addition the FSA have delivered a series of external seminars to compliance officers and consultants, aimed at raising awareness of expected standards.
The FSA will be interviewing key individuals from firms that formed part of the previous work to “understand the approach their firms have taken to remediate problems identified in their client portfolios”.
In particular the regulator said it will look at whether firms have been “sufficiently rigorous in identifying and dealing with past detriment that consumers may have suffered”. Following these interviews the FSA said it will consider whether we need to take further regulatory action.
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.
The latest review will make “judgements on the suitability of client outcomes” and the regulator said it will also undertake a direct assessment of firms’ systems and controls.
Further updates on this work will be provided in 2013.