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Improving Quality and Increasing Standards within Wealth Management Firms

The FSA recently ran a series of seminars in London and Manchester on risk profiling and suitability for those responsible for compliance within wealth management firms and consultancies. The seminars proved to be highly popular and oversubscribed.

The presenters had been directly involved in a number of the FSA’s wealth management initiatives including the business case and reviews undertaken with a sample of sixteen wealth management firms, publication of the FSA’s findings and concerns at the lack of KYC and suitability records and the publication of February 2011’s FSA guidance consultation document and finally June 2011’s ‘Dear CEO’ letter.

Concerns over the apparent lack of systems and processes

The lack of KYC and suitability records and processes remain a major concern to the FSA and is a high priority for its attentions. In addition, its concerns over ‘tick-box’ approaches to risk profiling remain. Whilst many wealth managers have considered risk profiling and suitability as being primarily a concern of IFAs, it appears that the activities of discretionary fund managers, execution-only business and advisory services are also in the FSA’s spotlight.
The morning and afternoon workshops focussed on two aspects of wealth management using actual cases exposed through the FSA’s review:

• combined KYC, suitability and investment detail report for a client;

• monthly compliance MI submission to the board of directors of a wealth firm.

More effective than mere preaching from a lectern

Instead of the usual ‘lecture’ format with speakers dispensing ‘pearls of wisdom’, the FSA interspersed their presentations with a morning and afternoon group workshops. The use of case study based workshops was a major contributor to the seminar’s success as it enabled the attendees to understand and appreciate the conflicts and discrepancies uncovered by the FSA’s sample review; a format that is much more effective than mere preaching from a lectern could ever achieve.

The FSA’s message is clear and unequivocal

The FSA’s seminar was extremely well received by the attendees and was an appropriate format to engage and win hearts and minds within wealth management firms; businesses who are generally not shy of expressing their views and frustrations concerning the FSA.
The final word on the matter was contained in the last presentation slide; a quote from Margaret Cole, the FSA’s head of conduct: “You should be aware that we consider suitability – and the ability to demonstrate it – a key area of risk in this sector and wealth management businesses can expect to see continuing and increasing supervisory focus on these issues.”

On the matter of risk and suitability, the FSA’s message is clear and unequivocal. It is obvious that they mean business. 

© Amatica 25/01/2012