Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

FSA warns on mis-selling outsourcing risk

FSA warns on mis-selling outsourcing risk

The Financial Services Authority (FSA) has warned advisers who outsource investment of a mis-selling risk due to mismatches in the risk profiles of clients and the portfolios they are placed in.

At a Defaqto conference, FSA technical specialist Rory Percival said it was insufficient for an adviser to place a client judged as cautious into a discretionary fund manager’s cautious portfolio without further analysis.

'The obvious area of concern is risk profiling and matching that with an investment solution, ' he said. 'This mismatch could result in mis-selling on your hands.'

He said that suitability checks and risk profiling needed to be carried out by either the DFM or the adviser.

'Both the DFM and the adviser have suitability obligations to the same client,' he said. 'But it needs to be clear who is doing what.'

He added the regulator would be focusing on disclosure agreements provided by advisers using a DFM as part of its thematic review of adviser charging this year.

He said the FSA would not be judging whether advisers’ propositions represented ‘value for money’ but that charges were properly disclosed.

'The only person who can decide that is the client,' he said. 'And for a client to do make that judgement, they need to be clear about what service they are getting and how much it will cost. We have specific disclosure rules on adviser charging so disclosure becomes pre-eminently important.'

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Nick Hayes: finding good bonds in negative yield world

Nick Hayes: finding good bonds in negative yield world

Why do some bonds offer 'negative yields' and how do you avoid them? Nick Hayes of AXA Investment Managers explains.

Play Neil Gregson: gold is prettiest in ugly contest

Neil Gregson: gold is prettiest in ugly contest

The JP Morgan Natural Resource fund manager talks about the prospects for gold with plenty of uncertainty in the global economy.

Brewin's Gutteridge & Foster talk property with Standard Life's Baggaley

Brewin's Gutteridge & Foster talk property with Standard Life's Baggaley

Gutteridge and Foster discuss UK commercial property with Jason Baggaley, manager of the Standard Life Property Income investment trust

Your Business: Cover Star Club

Profile: Creechurch Capital’s CEO on going the extra mile in a crowded market

Profile: Creechurch Capital’s CEO on going the extra mile in a crowded market

Growing a business is the main aim of many company owners but managing that growth in a controlled way is just as important

Wealth Manager on Twitter