Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

Suitability pressure could see 100 wealth managers 'shown the door'

Suitability pressure could see 100 wealth managers 'shown the door'

Up to 100 wealth managers industry-wide could be shown the door over the next year as they struggle to get to grips with suitability and post-RDR professional requirements.

Increasing pressure from the Financial Conduct Authority (FCA) and hefty fines handed out on the back of the suitability review, which was introduced in 2010, have already driven some firms to release some ‘resistant’ senior staff.

But Vertem Asset Management co-founder Gary Stockdale believes the haemorrhage of staff has only just started.

‘Over the next year or so, a hundred will leave. They will either be shown the door, or leave through a more natural process, and join smaller firms, especially boutiques,’ he said.

His view is shared by Gilly Green, wealth management practice leader at Knadel, who said an increasing number of firms are asking her how to motivate people showing resistance.

‘It’s round two of the suitability review and there have been a lot more fines, so firms are taking it a lot more seriously. What firms are saying is “get with it or get out”,’ she said.

The chief executive of one wealth management company, who preferred to remain anonymous, described those in the industry who remain resistant to suitability measures as ‘the dying embers of the old style of private client management’.

The CEO said the removal of this ‘final wave of resistance’ would ultimately prove to be a positive. ‘It will be good for the industry and clients. We need a modern financial services sector. With the pension reforms and the opportunities they present to wealth managers, the industry has got to be as slick and modern as possible.

‘With the client’s best interests at heart, there is no room for resistant behaviour. The good news is there are a limited number of firms where you can go and be a lone agent.’

The CEO also believes this will be beneficial for younger investment managers coming through.

‘In our company, we are pairing people up, so there are deputies for every client manager. Senior managers see it as a good way of having an elegant retirement plan. There is a new generation coming through who are well qualified and educated to degree level standard within their profession, up to level 6 when they don’t have to be,’ the source said. ‘The bar across the industry is being raised quite rapidly.’

Lack of control

Thesis Asset Management director Michael Lally said some firms that have ‘a person managing a lot of money but who is not compliant,’ have introduced a young qualified assistant ‘who takes the conversation when the older guy takes the client out for lunch but does not actually give advice on investments’.

‘But that’s a dangerous game to play,’ warned Lally, ‘because at some stage the younger guy will not be there and the client will desperately want advice and something will happen.’

Mark Somers, a director at wealth management recruitment firm Somers Partnerships, recognises this trend.

‘Since the introduction of the suitability review, those people who haven’t or can’t pass the tests have been assigned a junior qualified assistant,’ he said. ‘They have just carried on business as usual. Assistants are the pragmatic way firms have dealt with that question.’

However, Knadel’s Green said firms need to take responsibility and incentivise staff to qualify, penalising them if these goals are not met.

‘Those people should not be getting their bonuses if they haven’t achieved those objectives. But even if the deadlines are written in their objectives, there are many firms that don’t penalise managers if they haven’t done it.’

Dan Macey, an associate director at recruiters Suffolk Lane Search, added he expects the stream of departures to resemble that seen in the IFA market following the onset of the retail distribution review (RDR) with many ‘retiring a bit early and selling their books’.

‘Most people I have spoken to are passing those exams, and believe it is a necessary evil because the regulator is pushing them to do so,’ he added.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
1 Comment Play Citywire Scotland: how wealth managers use new tech

Citywire Scotland: how wealth managers use new tech

We caught up with a few wealth managers at our annual event in Gleneagles to find out what technological innovations they are employing across their businesses.

1 Comment Play CEO Tapes: Buxton to Gilbert - ‘my Glencore quandary’

CEO Tapes: Buxton to Gilbert - ‘my Glencore quandary’

Do not miss the first two minutes of this film as Richard Buxton shares how he has been challenged by a client for owning shares in a certain company.

Play CEO Tapes: the huge opportunities for asset managers

CEO Tapes: the huge opportunities for asset managers

From tech disruption, retirement and poaching, the CEO discuss the opportunities for their businesses in this episode.

Read More
Wealth Manager on Twitter