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The FCA 'arrow' visit: what next for suitability?
by Elsa Buchanan on Feb 26, 2014 at 11:28
This idea is shared by New City Initiative chairman Magnus Spence, who said he knew of other firms that have had visits over the last year. ‘The FCA are much more targeted, or much more aggressive in the way they are looking for things, I have heard,’ he added.
Managers and consultants agree the FCA is taking issue with processes, controls and monitoring. To Lally, this confirms the FCA’s focus on treating customers fairly (TCF) and proving suitability.
David Middleton, head of client proposition at Towry, agreed. He said recent discussions with the FCA highlighted ‘inducements, remuneration and incentives, culture and controls’ as areas that could work against the delivery of good consumer outcomes.
However, Karen Bond, consultant at Walbrook Partners, said the FCA’s attitude ‘hasn’t changed towards suitability’. She anticipates the FCA will visit firms that cannot prove sustainability or where they have found instances of portfolios not being suitable.
Lally, who said Thesis has not recently received a visit by the FCA, believes ‘annual reviews’ could become the norm. ‘Historically, discretionary managers have never really done that.’
Ian Porter, head of wealth management at Sanlam Private Investments UK, said the FCA has visited the firm in the last year, alongside a separate risk conduct meeting.
‘For the FCA, you should be able to self-identify issues in your business and take action to sort those issues out,’ he said. Sanlam recently retrained its investment managers around attitude to risk questionnaires and scoring. Porter said the FCA ‘made it clear that they will be looking at stuff around mergers and acquisitions’.
The source from a national wealth manager added: ‘We are at risk of the FCA considering investment managers to be tax and financial advisers. I think the FCA is going to expect us to have a holistic financial advice and I’m concerned that makes us a specialist.’
There is also a general consensus the FCA will issue more fines.
Lally said: ‘The FCA is working on the basis that they are making examples of people at the moment – the unlucky ones will be hit by excessive fines to send a message to everybody else.’
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