After the FCA’s Consumer Duty portfolio letter to consumer investment firms, Wealth Management firms were scarcely able to draw breath before the FCA wasted no time in commencing a review of the Sector, focusing first on those who offer Discretionary Portfolio Management Services (DFMs).
On 17 April 2023, the FCA issued an information request to a sample of Wealth Management firms, asking them to provide a significant amount of information about their processes, systems, controls, oversight and how these processes are applied in practice. Given the volume of information requested, the timescale given by the FCA for firms to respond is quite tight – the first tranche of information was due by 24th April 2023 and the second is due on 10th May 2023.
The main areas of focus are understanding the firm’s business model and how they consider the following:
- Assessment of Know Your Customer (KYC) and the matching of discretionary investment portfolios to clients
- Composition of portfolios and firm’s approach to assessing investment suitability (both on an initial and ongoing basis)
- Approach to investment risk and firm’s view of asset allocation across various risk levels
- Approach to due diligence on investments and managers
- Implementation of the New Consumer Duty
This letter is a follow-up to the FCA’s Wealth Management and Stockbroking Portfolio information request which they issued in October 2022. This leads us to think, is it possible that firms’ responses to this letter raised some concerns for the FCA and they may now be considering a broader thematic review of the Sector? Time will tell, but the FCA also appears to be taking the opportunity to review how Wealth Management firms are implementing Consumer Duty.
Once they receive this information, the FCA will carry out a desk-based review and may follow up with additional information requests, pay a visit, or make a call to some firms. It is also likely that we will see the FCA sending similar information requests in the coming months to other sectors, perhaps focusing on the advisory businesses of Wealth Management firms.
If you receive an information request from the FCA, or are concerned that you may receive one, please do get in contact with us as we can:
- advise and guide you on the information and documentation that the FCA will expect to see as part of your response;
- review and provide feedback on your proposed responses; and
- support you in addressing any gaps identified by carrying out a compliance health check of your business, help you to develop/refresh policies and procedures, review your Compliance Monitoring Plan, KYC investment management and allocation processes, or carry out suitability reviews of client files
We can also help you with your Consumer Duty implementation plans and have a variety of tools available for purchase, such as online and face-to-face training and relevant policies and procedures. We also have a number of templates that you may find useful including an implementation plan, fair value assessment, and product approval template.
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