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Serious failings come to light in FSA’s advice and platform review
by Iain Martin on Mar 30, 2010 at 08:51
The Financial Services Authority (FSA) has uncovered a number of serious adviser failings in its investment advice and platform review. It ordered two firms to undertake past business reviews and has referred another to its enforcement division after uncovering problems during its thematic platform work.
The FSA found evidence of unsuitable investment advice at 10 of the 12 firms it examined in detail for its review, recording serious and persistent problems in the advice processes at the small practices, networks and nationals it visited.
The main reason for unsuitable advice was advisers’ failure to consider the combined cost of advice, funds, products and platform, according to the regulator.
‘We have found some pretty bad practice in two areas; firstly, the quality of advice and secondly, the extent to which advisory firms have thought about how working with platforms means their business needs to run differently,’ said Peter Smith (pictured), head of investment policy at the FSA.
‘A lot of the firms that moved to use platforms had not thought about the broader implication of how their business runs,’ he said.
The FSA found cases of investment recommendations not matching clients’ attitudes to risk, and problems with platform re-registration not being disclosed to clients. It also found advisers had not done due diligence before selecting a platform.
Advisers should review their platform and the market ‘periodically’, said Smith. ‘It would be a bit of an odd outcome if some started using a platform and then stuck with it without considering any alternatives,’ he said. ‘We have not prescribed anything in this area but the expectation is that they review the platform they choose to use at least on a periodic basis.’
The FSA does not plan to change its rules over platforms supplying advisers with non-monetary inducements, despite uncovering one firm that had a volume override agreement with its platform.
It noted that some firms in the review had integrated platforms into their businesses and provided suitable investment advice to clients.
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2 comments so far. Why not have your say?
Man in Black
Mar 30, 2010 at 12:06
Careful.
FSA were very careful to point out that their stats were not representative of the market: they looked at 30+ firms originally and *then* looked in more detail at the higher-risk 12 firms before looking at any cases.
The way your article is written suggests that the bulk of IFAs are getting this wrong, which it NOT actually FSA's view (believe it or not!)
report thisAnon666
Mar 30, 2010 at 16:54
The FSA seems to have a lot of expectations which they apply with the benefit of hindsight.
They frequently use very vague language which can be interpreted in many different ways yet they would be extremey critical of an IFA firm doing the same.
As per usual, Pot & Kettle spring to mind!
For example, can they please clarify what "Due Diligence" they would expect to be completed.
As a regulator they have a serious part to play in this and in the interests of fairness to IFA's and the consumer they should not sit on the fence and issue vague statements and then criticise at a later date if they don't like a platform.
Pig's & Flying also springs to mind!
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