FCA has written to CEOs of wealth management and stockbroking firms setting out its view of the key risks of harm their firms pose to customers and markets. FCA has recently started its 2 year strategy plan on supervision of these markets, and as an early part of the plan wants firms to consider the risks and what actions they may need to take to mitigate them.
FCA enumerates the dangers as:
- customers risk losing money through fraud, scams and poor client money and asset controls: FCA is focusing on firms who, deliberately or otherwise, do not properly align portfolios to client risk;
- customers losing confidence in the industry because of poor management of conflicts and market abuse;
- customers investing less because poor order handling and execution processes do not deliver the best outcomes: the Investment Platforms Market Study has recently highlighted weaknesses; and
- poor disclosure of costs and charges adversely affecting customer understanding.
The letter also:
- notes the introduction of the SMCR with its aim again to reduce consumer harm and strengthen market integrity;
- reminds firms with customers elsewhere in the EEA to decide on their approach to servicing existing contracts post-Brexit; and
- notifies firms that it will be focusing on the switching process during the project and will consider further action if the efficiency of the process does not improve.
FCA expects firms to discuss matters generally with their normal supervisory contact but also provides the details of a key individual if a firm has urgent issues of strategic importance to raise.