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FCA tells firms to revisit past advice after suitability review
The Financial Conduct Authority (FCA) has said firms should revisit advice given in the past after it found unacceptable examples of suitability reports as part of a review which involved 700 firms.
In April 2016 the FCA started the review when it asked firms for suitability reports from the previous year.
The regulator has recently begun to send out letters to firms which took part in the review, detailing what it found out about individual firms.
As well as looking at suitability requirements for a particular client, the regulator has commented on whether reports have met disclosure rules and looked for ‘indications of weaknesses’ in the advice process.
Firms which did not meet the regulator’s standards have been told to rethink advice given in the past.
‘Where we have identified issues with your advice process, please consider how these may have affected any clients and what actions need to be taken to improve these processes going forward,’ the letter, seen by New Model Adviser®, said.
‘Where applicable, you should look to revisit any advice that may need reconsideration and possible further action by your firm.’
In the letter, the FCA tells firms whether the suitability report showed the advice was suitable, unsuitable or unclear. It also tells firms if the level of disclosure is acceptable, unclear or unacceptable.
Problems with advice processes are also identified, where the regulator looked to identify problems which may affect other clients not included in the review.
The FCA said that where problems have been identified with a suitability report, advice firms should tell the clients about any missing information.
‘Please revisit the client file and consider how the client can be informed of the necessary information that has been omitted. In addition, consider how the omission of relevant information disclosure might have adversely impacted other clients and consider whether this omission reveals an area in your wider advice process which might be improved,’ it said.
Advice firms have two weeks to contest any inaccuracies in the FCA’s response.
The FCA has so far stopped short of publishing wider findings from the review of suitability reports.
However, under the ‘next steps’ heading in the letter the regulator said it was considering how to publish general findings from the reports to investment advisers.
‘The findings in this letter are specific to your firm and do not constitute general findings from our review. We will not name firms when communicating any general findings,’ it said.
Compliance Consultant can provide past business review services for any size of IFA or Wealth Manager. Please contact our London office on
0203 815 7939 or 0207 097 1434