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:
- 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 ;
- Overall, 79% of files reviewed had a high risk of unsuitability or the suitability could not be determined;
- 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.
Click here to download the letter.
