InvestmentsDec 9 2015

FCA threatens five wealth managers with action

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FCA threatens five wealth managers with action

The Financial Conduct Authority is considering taking action against five wealth management firms for allegedly offering unsuitable portfolios to clients.

The City watchdog released its thematic review today (9 December), which examined the suitability of retail investment portfolios managed by wealth management and private banking firms.

As part of the review, the FCA said it was considering using its powers to investigate five firms, which might be “required to undertake significant remediation programmes to raise standards”.

“Some of these exercises may involve us using our regulatory powers, such as the appointment of a third party (skilled person) and we are considering the use of our enforcement investigation powers,” the regulator said.

These five firms were part of a sample of companies used in the thematic review.

Of the total sample, four firms were required to take little or no action because they appeared to meet the expected standards, and six firms would need to devise a plan to remedy the shortfalls.

The FCA said many wealth managers still have to make “substantial improvements” in gathering, recording and regularly updating customer information to support the investment portfolios they manage for customers.

It argued that firms need to do more to ensure the composition of the portfolios they manage truly reflects the investment needs and risk appetite of their customers.

The review pointed out that a number of firms have taken steps to both improve the suitability of investment portfolios to customers.

Despite this, the FCA said: “There is clearly a need for further improvement by many firms, as there are still too many cases where suitability cannot be demonstrated or there is a high risk of unsuitability.”

katherine.denham@ft.com