Regulation  

FCA urges advisers to revisit client risk disclosure

The FCA’s Rory Percival has urged advisers to review their policies for disclosing clients’ risk after finding very few examples of good practice in the FCA’s latest thematic review.

Speaking at the Defaqto Conference yesterday, Mr Percival, a technical specialist for the regulator, said the FCA had found “very few examples of good client risk disclosure” in its last review and said advisers should review their processes if they had not yet done so.

Mr Percival said the FCA’s review had found that it was “very difficult for clients to understand what level of risk they were taking on” because risk descriptions were “not very good”.

Article continues after advert

He said: “If you have not yet looked at risk disclosure you should revisit the FCA paper and read it again as good practice was hard to find.”

Many of the questions at the conference revolved around risk-profiling and asset allocation tools and Mr Percival said advisers were responsible for examining how such tools worked and using them in an appropriate manner.

He said risk-rated funds were a particular area of concern for the FCA, particularly when it comes to mapping a portfolio’s risk profile to the client’s risk profile.

He warned that simply matching a client rated as risk level three to a portfolio rated as three was not good enough, because there were “a number of different factors to take into account”.