Focus on suitability compliance: a message not only for wealth managers

Key points from the Wealth Management review

• The FSA concluded that the majority of firms reviewed posed a high or medium-high risk of detriment to their customers

• Firms have been unable to demonstrate that client portfolios and/or portfolio holdings were suitable

• The medium to high risk of unsuitability arose principally from inconsistencies between portfolios and:

  • client's attitude to risk

  • client's investment objective, investment horizon and/or agreed mandate

   

• Some files also failed to comply with house models

• The FSA believes that the failings identified may point to deficiencies in management and controls (Principle 3 issues)

• Firms are expected to assess their current compliance with suitability requirements, to mitigate the risk of future non compliance, and if failures are identified, to proactively consider redress

• The FSA stresses that it will investigate and take action where appropriate