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Is Coutts’ suitability warning the tip of the iceberg?

by Danielle Levy on Jun 16, 2014 at 14:35

‘That may determine the way they follow suit. I do think there are a number of organisations that are not as far down this path as they should be and this, along with a continued focus from the FCA, should mean they continue to have this as a high priority for them to resolve.’

Hupe is still speaking to organisations that need to do more in terms of reviewing legacy positions and putting in place processes and controls for suitability.

‘I have not seen anything on this scale, and I think Coutts is taking an admirable approach to dealing with this, as long as they can follow through, rectify and put processes in place going forward,’ he said.

He does not expect to see another regulator-led thematic review on suitability but anticipates further fines and Section 166s. ‘I think the regulator wants to keep this top of the agenda and at the forefront of wealth managers’ minds. One of their roles is about protecting the end-investor. This is as crucial to that as can be.’

Regulatory consultant Mike Browning adds the industry must be aware of the application of hindsight. He does expect there will be further thematic and supervisory reviews, plus more section 166s and enforcement to come.

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12 comments so far. Why not have your say?

Neil Shillito

Jun 16, 2014 at 14:56

I refer particularly to the comment " Coutts is not alone. A portion of the wealth management industry is getting to grips with how to prove suitability, potentially due to inadequate systems and processes historically"

Fishing out the records is most certainly going to be problematic " due to inadequate systems and processes historically", but the root cause of it all? Commission bias.

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Anonymous 1 needed this 'off the record'

Jun 16, 2014 at 15:17

I suspect Distributor Influenced Funds will be looked at more closely again in the near future. Especially where a firm badges themselves as "independent" and/or "unbiased" but fails to clearly disclose/document to the client the obvious conflict of interest in recommending their own fund. I've seen it happen before where illiquid assets were held in a DIF and the financial advisers were encouraged to retain/increase FUM so that it diluted the exposure to the illiquid assets with little regard to the new investor who was buying a fund-of-funds with significant (5%+) exposure to an already suspended fund and was none the wiser.

Keep investment decisions clean and honest and it won't come back to bite you on the bum! xx

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Neil Shillito

Jun 16, 2014 at 15:37

Fair comment if it were founded on fact. Take care.

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Keith Cobby

Jun 16, 2014 at 15:42

How can 'independent' firms have or recommend their own funds. It seems to me that this will go back to polarisation when you can recommend (sell) your own funds or other peoples.

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Anonymous 1 needed this 'off the record'

Jun 16, 2014 at 15:52

Huh? My comment wasn't a response to yours or aimed at you Neil. I don't know who you are. It was a standalone comment on the main article. Maybe Citywire should put a "reply" button so that people don't get confused and (seemingly) defensive xx

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Neil Shillito

Jun 16, 2014 at 15:59

No need to apologise but it was gracious of you to do so and much appreciated.

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Anonymous 1 needed this 'off the record'

Jun 16, 2014 at 16:04

@Keith it's a grey area but if done for the right reasons and charges etc are competitive and disclosed properly to the client then DIFs are a very efficient centralised investment proposition. Some work really well for the clients, some don't. It'd be wrong to tar all with same brush.

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Jun 16, 2014 at 16:15

ALL the individual advisers from 1957-1977 are likely to be deceased or retired. MOST of the advisers from 1977-1997 are likely to have left the industry. MANY of the advisers still left must be quaking in their boots whether or not they've underperformed, poorly sold in the past or inherited problematic business or otherwise from previous colleagues......ALL the broking/IFA/wealth businesses must be choking on the potential claims with the banks sitting pretty relaxed having factored in the coming tidal wave with the knowledge that TBTF is still ingrained.

JOBBING BACKWARDS can only end in tears for everybody.

What an appalling culture FCA (FSA) has created from RDR. Nothing positive can come from this whatsoever. Nice work for lawyers & compliance personnel though,.

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Anonymous 1 needed this 'off the record'

Jun 16, 2014 at 16:21


At ease keyboard warrior. Please be professional, this isn't the comments section on a tabloid website! I just did a quick Google and this now makes sense. No more comments from me so if you really want to get the last word then please go ahead.

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Ian Marsden

Jun 16, 2014 at 16:46

@ Neil - commission bias was primarily an issue for the IFA sector, who we all know have traditionally invested in funds, eschewing investment trust and direct investments.

Investment Managers and Stockbrokers have only started to go down this route more recently, and their problems are less likely to be related to commission and more to do with inadequate Compliance procedures and KYC documentation.

Stockbrokers and investment managers have had their problems, but to tar the whole industry with the 'commission bias' brush is just inaccurate.

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Neil Shillito

Jun 16, 2014 at 16:55

Scots are canny; the Irish are all funny; Italians are effusive; Chinese people are inscrutable. None of it is true of every member of their race and creed, but the generality is recognised.

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Gavin Palmer

Jun 16, 2014 at 22:16

I think the emphasis is in picking out the extreems as they are the easiest. I think personally that Coutts has tried to duck one particular extreem advice that they gave. ie recommending a massive portion of a cash rich wealthy client to invest in RBS disasterous 2008 rights issue.

Suggesting a client puts 80% + of their assets in just one bank share RBS , a company that is teetering on the brink and asking for the largest ever rights issue, after having a massive shareholder revolt against the acquisition ABN Amro would seem a pretty clear cut case when they were owned by that same bank and were in a position of fiduciary duty.

As for going back to 1957 that is IMHO RBS subsiduary Coutts effort to try to kick this issue as far as possible into the future rather than face the consequences of such a breach of trust in the present. PS The investors lost 70% in 6months and are down 85% plus erosion from 6 years of inflation.

There was no margin of safety in that investment and no individual should be advised to put such inheritances, proceeds of sale in just one share.

However always good to have a margin of safety and its the odd lumpy investments that will catch the eye. That issue was very lumpy!

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