Suitability crackdown: have firms taken heed of FSA warnings?

Rathbones has bolted on work looking at suitability to other projects, so has not had to introduce a large IT project at a significant extra cost. Chavasse also noted the firm was unlikely to lose any clients, particularly at the smaller end, as a result.

Is technology part of the problem?

Robert Hupe, a consultant at Knadel who has run ‘suitability health checks’ at several companies, says the review has caused some firms to bring forward investment in IT systems.

However, he stressed that an over-reliance on technology, particularly risk profiling tools, can lie at the heart of the problem. ‘I have seen examples where people bought technology to solve a problem, but technology on its own can’t solve the problem,’ he said.

‘It has to complement the approach to wealth management. For example, this could be risk profiling software. The FSA has said a risk profiling tool does not provide an answer, but forms part of the process. It may come out with an answer, but this should be discussed with the client and validated.’

For firms grappling with the suitability review, he believes the FSA is looking for a ‘culture of suitability’ coming down the organisation, with buy-in at the most senior level.

‘There has to be clear lines of suitability coming down and management information coming up,’ Hupe added.

From his visits to companies, he has seen instances of firms revisiting and rewriting procedures, reviewing their entire client bank with efforts made to address any gaps or anomalies.