FIN. TeamFCA has carried out a supervision review of how investment advisory firms treat clients they acquire from other firms. The sample in its study was small, and FCA recognises it may not be representative of the wider market, but noted that firms did not seem to focus enough on the impact of the acquisition on clients. FCA looked at six firms, and focuses on communications with clients at the point of acquisition, integration of clients and suitability of replacement business recommendations. Some of its concern was driven by the increasing preference of firms to offer centralised investment propositions. If the solutions firms offer are not suitable for everyone, there is a risk clients will get unsuitable advice. Generally, although FCA found some good practices, it also found:
- communications to clients did not provide enough information to meet the clear, fair and not misleading test;
- firms did not always recognise situations where client agreements did not provide for the ability to transfer clients to another firm, and did not comply with the requirement to get agreement before charging;
- firms were sometimes charging clients for services the clients did not receive;
- in some cases, adviser remuneration was structured in such a way as to increase the risk of unsuitable advice being given;
- charging policies were not always clear;
- firms were not considering all relevant costs when determining whether recommendations to switch or transfer business were suitable.
FCA reminds firms of its 2012 guidance on assessing suitability in replacement business and centralise investment propositions and says the advice is still valid.
Following the review, it asked the firms assessed to make certain improvements and now expects all other relevant firms to read the report and assess whether they need to improve their policies and procedures.
