A former FSA senior associate has warned wealth management firms and advisers that suitability of advice will remain a key regulatory focus under both the FSA and the Financial Conduct Authority.
In June, the FSA sent wealth management firms a Dear CEO letter after it found 80 per cent of files it reviewed presented a high risk of unsuitable advice. It found that out of 16 wealth management firms reviewed, 14 were judged to pose a high or medium risk of consumer detriment.
The letter followed on from FSA guidance on suitability and risk-profiling earlier this year.
Former FSA senior associate in the conduct risk division Richard Scrivener joined regulatory consultants Bovill this month.
Speaking at a Bovill presentation on suitability last week, Scrivener, who wrote the FSA’s Dear CEO letter and was involved in the regulator’s suitability work, admitted the sample size on which the letter was based was small.
He said: “Normally, the FSA would not publish a Dear CEO letter on the back of such a small sample but because of the findings it was decided that there was a problem here, so we wanted to try and put a stop to it and give firms an opportunity to sort things out.”
Firms that received the letter from the FSA were due to respond by August 9.
Scrivener says: “Even if firms did not get the letter directly, they should be considering the issue of suitability because it is not going away. There will be follow-up work.”
An FSA spokeswoman says: “Suitability is already a key focus at the regulator, which is demonstrated by the reviews we have carried out and the enforcement cases we have brought based on unsuitable advice.”