The FSA is requiring wealth management firms to commission costly skilled persons reports as part of its work on unsuitable advice, according to law firm Beachcroft.
In June, the regulator sent a Dear CEO letter to wealth management firms after it found that 80 per cent of the files it reviewed presented a high risk of unsuitability. Of the 16 firms reviewed, 14 were judged to pose either a high or medium risk of consumer detriment.
The FSA can force firms to appoint a skilled person to carry out a skilled persons report, also known as a section 166 report. It must be carried out by an independent third party which reports to the regulator.
Beachcroft partner Daniel Preddy says: “We know that a number of firms whose reply to the FSA’s Dear CEO letter did not come up to scratch are now having s166 reviews imposed on them. These reviews are apparently fairly limited in their scope but have the potential to be widened out if the outcome of the initial review work is deemed unsatisfactory.”
An FSA spokeswoman says: “We did say there would be follow-up work, which is dependent on each firm.”
Atkinson Bolton Consulting director Simon Gibson says: “Wealth management firms are regulated and need to be seen to be doing a good job. I do not think this is unreasonable.”