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Dear CEO letters for wealth firms

The FSA has sent a Dear CEO letter to wealth management firms after it found 80 per cent of files it reviewed presented a high risk of unsuitable service.

Speaking at the Chartered Institute for Securities & Investment’s annual conference in London this week, FSA director of conduct policy Sheila Nicoll said the regulator’s review of 16 wealth management firms revealed “significant and widespread failings”. Firms included major international private banks.

She said four out of five of the files reviewed had a high risk of unsuitability or the suitability could not be determined. Of the 16 firms, 14 were judged to pose either a high or medium risk of detriment to their customers.

Over two-thirds of the files were either inconsistent with firms’ models or with clients’ attitude to risk.

Nicoll said that in some cases, firms were unable to demonstrate suitability in line with know your customer requirements or were using out-of-date customer information.

The FSA also found that firms were unable to demonstrate that client portfolios were suitable due to inadequate risk profiling and failure to implement Mifid client classification requirements.

Nicoll said a number of the firms reviewed are facing regulatory action.

The letter calls on all wealth management firms to conduct a review of their client files.

Bestinvest senior investment adviser Adrian Lowcock says: “These firms are missing the basics, like getting risk profiling correct. Affected clients must be contacted.”


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