Of the remaining two thirds, half require some improvements to meet its standards and the other half raised no substantial concerns
The report follows previous work looking into just how well the retail investment portfolios provided by wealth managers and private banks understand and cater for the needs of clients that uncovered some significant concerns.
The new thematic review, which assessed 150 files from 15 firms, demonstrates that, while a number of firms have taken steps to both improve and demonstrate the suitability of customer investment portfolios, “many firms still have to make substantial improvements in gathering, recording and regularly updating customer information to support the investment portfolios they manage for customers”.
Of the 150 customer files reviewed the FCA said, 34 (23%) indicate a high risk of unsuitability, 55 (37%) are unclear and • 61 (41%) show a low risk of unsuitability.
This is an improvement from the previous work undertaken in 2012, the FCA said, where the proportion of high risk or unclear files was 79%.
While there are clear indications that some firms have responded to the issues raised in the June 2011 Dear CEO letter, it said, “there is clearly a need for further improvement by many firms, as there are still too many cases where suitability cannot be demonstrated or there is a high risk of unsuitability.”
Not only do firms need to better ensure that their governance, monitoring and assessment arrangement are sufficient to meet their regulatory responsibilities in relation to suitability, it added: “Firms need to do more to ensure that the composition of the portfolios they manage truly reflects the investment needs and risk appetite of their customers, especially those who have a limited capacity for, or desire to expose themselves to the risk of, capital loss.”
