The FCA sees improvements in suitability at wealth managers, but concerns remain

Published: 09/12/2015     Last Modified: 09/12/2015

Wealth managers and private banks have made progress in demonstrating the suitability of their clients’ portfolios, a thematic review by the Financial Conduct Authority (FCA) has found.

However, some firms need to make substantial improvements in client information practices as well as ensuring the portfolios they manage truly reflect the needs and risk appetite of their customers. The FCA will be following up on these issues with these firms.

Megan Butler, FCA director of supervision, investment, wholesale and specialists, said:

“The UK wealth management industry plays a vital role in delivering financial services.  It is positive that a number of firms have taken steps to improve and demonstrate the suitability of their clients’ investment portfolios. We are concerned, however, that some do not appear to have heeded the messages we have put out in recent years, and taken steps to identify and correct problems we’ve previously identified. Getting suitability right is fundamental to providing a portfolio management service that meets customers’ needs.”

The FCA encourages all firms providing discretionary and advisory portfolio management services to retail customers to review its findings, consider whether any of the issues identified apply to their own businesses, and take action where necessary. To further help firms, the FCA has provided some examples of good and poor practices observed in its review.

Notes to editors

  1. Thematic review: Wealth management firms and private banks.
  2. Dear CEO letter June 2011.
  3. Speech July 2013: The FCA’s approach to supervising wealth management and private banking firms.
  4. FSA’s finalised guidance (FG11/5): Assessing suitability: Establishing the risk a customer is willing and able to take and making a suitable investment selection, March 2011.
  5. MiFID II will be coming into force in the UK and some of its provisions will apply to firms providing portfolio management services to retail customers.
  6. In August 2015, the FCA and HM Treasury launched the Financial Advice Market Review (FAMR), which will examine how financial advice (including advice on retail investments) could work better for consumers.
  7. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  8. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  9. You can find more information about the FCA, as well as how it is different to the PRA.

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