Coutts’ chief executive Michael Morley has written to all UK clients to warn of potential suitability issues with their portfolios, Wealth Manager can reveal.
In the letter, which has been sent out to clients over the past few weeks, the chief executive said the private bank had agreed with the FCA that it will review the suitability of all investment portfolios. Non-investment products and services will not be included in the review.
It is understood the review of the suitability of investment advice given in the UK relates to investments held by clients on 26 November 2012, the date Coutts implemented the retail distribution review (RDR).
It is expected the review will not be concluded until early 2015. However, clients will be notified as soon as their investments are reviewed. If investments are found to have been unsuitable, Coutts will then send clients a compensation offer and the opportunity to exit the investment.
Morley (pictured) said the trust of Coutts’ clients was its number one priority and explained the ‘review is designed to make sure that suitable advice was given and we put things right when it was not.’
‘We are proud of our new wealth management advice service and we believe it sets a standard for giving objective advice to clients, based on a comprehensive understanding of their personal assets and liabilities,’ he said.
‘There have been some instances where the advice given during our previous advice process could have been better, and we are working hard
to address that.
‘We want our clients to be absolutely certain that every investment made by them is indeed suitable, and continues to be suitable. If not, we will ensure that portfolios are appropriately adjusted, and if clients have suffered any financial detriment, they will be compensated in full.’
As the scale of compensation payments cannot yet be determined, Coutts declined to disclose how much the bank is setting aside to cover this.
In November 2011, Coutts was fined £6.3 million by the regulator for suitability issues around its sale of an AIG bond. The private bank is not alone. In the same year HSBC was fined £10.5 million, while Barclays was fined £7.7 million over broader suitability failings.
Since the RDR was introduced, Coutts has revamped its wealth management advice service to make it a more ‘holistic needs-based service’.
The bank also took the decision in November 2012 to separate the roles of its client-facing staff. While they previously carried out both general banking and wealth management, the roles are now firmly divided.