The Financial Services Authority (FSA) is contacting firms offering wealth management services after identifying ‘significant widespread failings’ around record keeping and suitability and has said the sector may face tougher supervision as a result.
The watchdog wrote to all chief executive officers of wealth management firms in July, highlighting research that revealed major failings based on a sample of firms.
However, the FSA is concerned these failings stretch beyond this sample and are prevalent among other wealth managers.
The FSA said: ‘We have now commenced a new phase of thematic work and will, again, be making judgements on the suitability of client outcomes but also complementing this approach with a direct assessment of firms’ systems and controls.
‘We will be acutely interested in whether firms have heeded the warnings and concerns contained within our previous communications. We will provide further updates on this work in 2013.’
The watchdog said it continues to work with firms from the first batch it assessed, in order to mitigate the risks and concerns that have already been identified. In some cases these led to enforcement referrals, skilled person’s reports and remediation programmes.
The FSA said it will plans to interview key individuals from all these firms so it can understand the approach they have taken to remediate the problems revealed in their client portfolios and whether they have been ‘rigorous’ In dealing with previous issued that may have caused consumers to suffer.
Subsequent to these interviews, the FSA will consider whether to take further regulatory action, it said.
In the initial ‘Dear CEO’ letter the FSA said that its findings aired concerns there is an ‘unacceptable risk’of clients of wealth management firms experiencing unfavourable outcomes.
It said: ‘The failings may point to deficiencies in the management and control architecture of firms, so wealth management businesses can expect to see continuing and increasing supervisory focus.’