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Coutts’ Morley: why we are reviewing every investment since 1957

by James Phillipps on Jun 05, 2014 at 11:19

Coutts’ Morley: why we are reviewing every investment since 1957

Coutts is to review every client investment dating back to 1957 in one of the most thorough suitability reviews ever carried out in the industry.

The then Financial Services Authority’s ‘Dear CEO’ letter put the suitability of client portfolios firmly under the spotlight and Coutts chief executive Michael Morley (pictured) said the private bank decided to carry out its internal review when it implemented the retail distribution review (RDR) in November 2012.

‘As we approached the RDR it became very clear to me that we needed to put in place a service that looked and felt very different to the process we had before. We wanted to set the standard for what we thought it should look like in the new world,’ Morley explained.

‘If we didn’t apply that historically, can we say with absolute certainty and conviction that all of our investment sales have genuinely been suitable? The only way to get this certainty was to go back and look at every investment our clients have had at the date of implementation by Coutts of the RDR on 26 November 2012.’

The scale of the project is huge with the private bank’s wealth managers reviewing all client portfolios - the oldest of which dates back to 1957 - and the work is not expected to be completed until early 2015. Many of these records are obviously paper-based but over time Coutts will look to digitise its historic files using the Avaloq back office system it adopted in April 2012.

‘If you want to do this properly, you can’t set an artificial line and only look back at investments after that time. It’s a big exercise, but it’s the right thing to do. We intend to be around in 2057 and 2157.’

Morley stresses that although Coutts has been in regular dialogue with the Financial Conduct Authority, ‘we are not subject to enforcement action and we do not expect to be subject to enforcement action.’

Like many of its peers, Coutts has already faced enforcement action and was fined £6.3 million in 2011 over suitability issues around its sale of an AIG fund. The likes of HSBC and Barclays have received even larger fines, reflecting the extent of the FCA's clampdown on the sector.

Morley said now it is very much a case of building a business for the future and remedying any past mistakes. If any clients are found to have suffered losses due to unsuitable investments, they will be offered compensation to put them back in the position they would have been in had they not had that advice.

The number of portfolios and the potential cost of redress are not known, and Morley admits that Coutts’ wealth managers will have a lot of work to get through reviewing client files.

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2 comments so far. Why not have your say?


Jun 05, 2014 at 12:11

How will you assess if an investment made in 1957 is suitable when you do not have detailed information on the client's total financial position and requirements in 1957 (or for that matter 2007) ?

What is essential is detailed regular ongoing review of the clients portfolio where the IT generated is reviewed and signed off by a thinking human being i.e 40% in bonds may be within the client's agreed strategic asset allocation but may not be acceptable if it consists entirely of bank cocos.

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Anonymous 1 needed this 'off the record'

Jun 06, 2014 at 08:38

You only need to go back as far as the Royal Bank of Scotland 2008 Rights issue I reckon to see inappropriate investments.

The cream of clients conned perhaps even the Queen was done over as well I would not be surprised the lack of honesty integrity and trustworthiness has long since gone from RBS and I expect Adam&Co and Coutts was pushed the same way. Who ever proposed them for Knighthoods should propose them for the stocks at the Tower of London.

Both companies had a leap in profits recently and a purge so I expect more trustworthy employees were shown the door. Perhaps that was commission based too?

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