The Financial Services Authority (FSA) has today published a Dear CEO letter outlining areas of concern following a review of the suitability of client portfolios in a sample of 16 firms across the wealth management industry.
The letter requests that firms consider whether they meet - and can demonstrate they meet - FSA suitability requirements.
The review assessed suitability of client portfolios against documented client information including the client's knowledge and experience, financial situation and investment objectives.
The results found:
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14 out of 16 firms were judged to pose a high or medium high risk of detriment to their customers, based on the number of client files which had a high risk of unsuitability or where the suitability could not be determined ;
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Overall, 79% of files reviewed had a high risk of unsuitability or the suitability could not be determined;
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67% of the files reviewed were not consistent with one or more of the following: the firm's house models; the client's documented attitude to risk; and the client's investment objectives.
The FSA is undertaking follow-up work with the firms reviewed. Some of these firms have already put in place major rectification programmes.
The letter can be found on the FSA website.
For further information, please contact Rachel Cohen on 020 7066 3324.
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