Wealth firms attacked by watchdog
BRITAIN’S financial watchdog has warned wealth management firms over the way they invest client money, prompting an angry response from the industry.
The Financial Services Authority (FSA) said it had found “significant, widespread failings” in the industry that put the interests of customers at risk.
The regulator warned 260 wealth managers in a letter yesterday to improve the way they advise retail investors.
But the trade body that represents wealth managers hit out at the watchdog’s intervention, saying it was not aware of any detrimental impact on customers.
“There has not, as far as we are aware, been any consumer detriment directly associated with the issue and our firms,” a spokesperson for the Association of Private Client Investment Managers said.
“We do take the matter very seriously and are keen to continue working with the FSA,” the spokesperson for the 184-member-strong body added.
The FSA had conducted a survey of 16 wealth managers and found that almost 80 per cent of clients had been sold at least one potentially unsuitable product.
Of those firms, it said 14 had acted in a way that posed a “high or medium-high risk of detriment to their customers”. It added that it was involved in “ongoing regulatory action” with the companies.
The review ranged from small independent firms to the UK wealth management units of global banks.
The warning focused on the ability of wealth managers to keep up-to-date records on clients’ wishes, needed to make investment judgments.
The regulator said 67 per cent of the files it reviewed were not consistent with the firm’s risk models, the client’s documented attitude to risk and the client’s investment objectives. “You should be aware that we consider suitability – and the ability to demonstrate it – a key area of risk in this sector and wealth management businesses can expect to see continuing and increasing supervisory focus on these issues,” said FSA business conduct head Margaret Cole (left).