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Will Ashcourt Rowan's fine bring down the curtain on ‘old fashioned’ broking?

by Danielle Levy on Nov 27, 2012 at 10:49

Will Ashcourt Rowan's fine bring down the curtain on ‘old fashioned’ broking?

The Financial Services Authority’s (FSA) ongoing suitability review could spell a death knell for traditional stockbroking models, senior industry executives and commentators are warning.

This follows the FSA’s decision to slap wealth manager Ashcourt Rowan with a £412,000 fine on the back of its concerns that outstanding legacy suitability issues had not been resolved.

The regulator found 23% of the Ashcourt Rowan portfolios it reviewed, which had been constructed by high net worth subsidiary Savoy Investment Management, showed a ‘high risk of unsuitability’.

Ashcourt chief Jonathan Polin revealed that although disclosed as a fine in the firm’s results, the penalty was actually a section 166, or a skilled persons order, which is linked to regulatory issues previously uncovered at the firm in another 166 issued in 2010.

Polin (pictured) explained: ‘The section 166 revolves around the Savoy Investment Management business. That business was what we may refer to as a more “old fashioned” stockbroking business. 

‘The world has moved on and I have taken pretty hard remedial action on that business. It was key for me to clean up that business and we have made significant changes.’

Polin added he expects a stream of section 166 orders are coming, related to legacy and ‘old fashioned’ business models.

More 166s and fines to come

His sentiments were echoed by David Couch, former Rowan Dartington and Arjent chief executive, who expects traditional stockbroking models to come under the spotlight even more beneath the new regulator, due to the historic tendency to give investment managers too much freedom.

In some cases, this was coupled with a lack of strong documentation or processes.

‘I think to a large extent the fine reflects how business used to be done and the fact that this approach to running portfolios is no longer acceptable,’ Couch said.

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1 comment so far. Why not have your say?


Nov 27, 2012 at 12:29

I came to the same conclusion some time ago myself which is why after 32 years in the City I exited this summer ahead of RDR. The trouble with ALL this new doctrine is that it takes NO account whatsoever for real privacy, traditional investment methodology and is simply intolerant of anyone who tries to stand up to this RDR nonsense. Historians in years to come will no doubt hail the 'old fashioned' model as plainly the weakness with the new suitability/risk model is that everyone will go down with the ship when the seas get choppy. At least the 'old' model allowed for a variance of business whereas the new fail to impress me as it's solely focused on fee extraction rather than investment in industry. Cornering a market has never been a smart move and as Adolf Hitler proved last century, by cornering people's mindsets it can cause some severe pain when the proverbial crisis deepens. Stockbroking and capitalism is now the dead parrot in the room.

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