The FSA has expressed concern at the inadequate systems and controls of firms using platforms in the wake of the regulator’s platform thematic review.
At the launch of Aifa’s platform due diligence guide in London last week, the regulator revealed that every firm it visited as part of its thematic review in March did not have the appropriate systems and controls in place.
The review saw the FSA carry out a desk-based analysis of 33 firms advising clients to invest through platforms, with 12 chosen for detailed assessments.
Rory Percival, an associate from the FSA’s pensions and investments team, said all 12 firms were deemed to have insufficient risk management processes to some degree. He warned that firms adopting platforms need to ensure their oversight and control arrangements are up to date. He said: “This is a particularly concerning area because when we did our thematic review earlier this year of the firms that we visited, to a greater or lesser extent, this was a failing with every single firm.”
Speaking to Money Marketing at the event, Percival said many firms moving their clients’ investments on to a platform will also be changing their business model from being transaction-based to providing an ongoing advice service.
Percival said: “Many advisers’ processes for checking client files are triggered by product sales. If you are now providing portfolio advice services, should you be thinking of doing your review process in a different way? For example, are the services promised actually being delivered to customers? Is your remuneration structured in way to deliver those services? The firms that we saw had not explicitly said to themselves ’we need to rethink our risk management processes’.”
But wealth management firm Baigrie Davies managing director Ian Howe, who also attended the Aifa event, said wraps still represent a good way to transition a business. He said: “As a result of us having this new technology clients are now far more involved and therefore have a far greater ownership of their finances and financial planning than before. There is a far healthier ratio of those that are fee-earners, compared to those that are non-fee earners. Fundamentally, because of the client engagement we have got far more loyal and engaged and happier client bank.”