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FCA's Griffith-Jones: 'there is more work to be done on suitability'
by James Phillipps on Oct 08, 2013 at 10:36
Suitability remains firmly on the Financial Conduct Authority’s radar in the wealth management sector, FCA chairman John Griffith-Jones has said.
The FCA chair also called on wealth managers to help to come up with solutions for the growing post-RDR advice gap.
Griffith-Jones (pictured) highlighted three key areas that the regulator was planning to focus its attentions on in the wealth management sector: the impact of the retail distribution review (RDR); suitability and anti-money laundering controls.
On the RDR, he declared that in spite of unintended consequences, not least the advice gap, he believes the legislation has improved retail investment advice. He also noted that the regulation has had less of an impact on the revenue streams of wealth management businesses in comparison to other sectors.
‘What we have now is clearly an improvement on what we had before. There might be side effects or unintended consequences, and we will monitor these closely,’ he told an audience at the annual conference of the Wealth Management Association, formerly the Association of Private Client Investment Managers and Stockbrokers.
Griffith-Jones said the regulator is monitoring the advice gap and said he would be interested to see what solutions the wealth management industry can come up with to bridge the advice gap.
The other issue that sits firmly on the FCA’s agenda is suitability, Griffith-Jones said.
‘We find there are questions from the industry on areas like advice and execution-only, where one begins and the other ends. As you would expect, these details are firmly on the FCA’s radar but the point remains unchanged. We expect the sector to arrange portfolios to meet the needs of its clients, to provide the regulator, and indeed the client, with some form of documentation, but not documentation for its own’s sake. It is to safeguard the customer suitably and indeed yourself,’ he explained.
In a bleak reminder to the wealth management industry following the Suitability Review, which started back in 2010, Griffith-Jones added: ‘Our thematic work suggests there is still work to be done in this area. The idea of suitability remains a live issue for us going forward.’
The third point on the FCA’s wealth management agenda is for firms in the sector to make sure they have strong anti-money laundering controls in place, to ensure the reputation of London as a ‘safe place to do wealth management business’.
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