We are reporting our findings of our supervision review of investment advisory firms’ practices when acquiring clients from other firms.
Why we carried out this review
We did this review to assess how firms treat the clients they acquire from advisory firms or client banks. Acquisition activity in the investment advice market has increased since the introduction of the Retail Distribution Review (RDR) in December 2012.
Why we are publishing this report
We know this sample may not be representative of the wider market, but want to share our findings so that firms can consider the key points raised when acquiring new clients.
Who this applies to
This report is relevant to:
- all advisory firms acquiring new clients from other advisory firms, including clients acquired from the client banks of individual advisers or other firms and those firms purchasing a whole legal entity
- all firms that facilitate payment of adviser charges, including retail investment product providers and platform service providers
This report will also be of interest to consumer groups and trade bodies.
What we found
We did see some good practices but, while we found that firms focused on the commercial benefits, they did not focus enough on how clients were impacted by the acquisition.
We expect all relevant firms to now consider the content of this report and assess whether they need to improve their own practices and procedures.
On page 3 of the report, in the “Client agreements” section, the comment in the third paragraph is not intended to suggest that assignment of contracts invalidates them, but rather should be taken as a comment that firms need to consider carefully whether the business transfer arrangements and mechanisms take proper account of what is needed under COBS, other applicable rules and by clients to ensure effective continuation of service to those clients.