Wealth managers are failing to deliver value for clients when they place market trades because many ‘do not understand key elements of the rules’ and are failing to adequately control costs.
The Financial Conduct Authority arrived at the conclusion following a review of 36 firms, including wealth managers, banks and traders. ‘These failings were compounded by insufficient managerial oversight or engagement,’ it said.
It added that it had identified ‘frequent attempts by firms to limit their obligations to clients’.
Both institutional and private clients were not receiving the level of client care expected, said FCA director of markets David Lawton.
‘The FCA expects to see firms act as good agents, placing equal focus on controlling client costs as delivering returns, and will take action where firms fall short of our standards.’
Four businesses in the sample had attempted to actively avoid rules on execution by changing how it defined order flows, and had been told to cease or desist by the authorities.
In addition to misunderstanding the rules or attempting to limit internal liabilities, many firms also lacked the infrastructure to monitor or evaluate client outcomes or avoid conflicts of interest.
The regulator conducted its review in advance of enhanced EU rules on best execution, and said it would be writing to the companies involved to offer feedback.