Dear CEO letter: FCA expectations for wealth management & stockbroking firms

Dear CEO | Release Date: 8th November 2023

To read a longer summary of this Dear CEO letter, click here.

To access the original FCA document, click he re.

Short Summary

The Financial Conduct Authority (FCA) has issued a “Dear Chief Executive” letter to wealth management and stockbroking firms, outlining the sector’s key risks and updated supervisory priorities. This includes the prevention of financial crime and the full implementation of Consumer Duty outcomes. The FCA expresses concern over significant losses to consumers through scams, fraud, and money laundering facilitated by firms, as well as exposure to inappropriate investment risks and poor value products.

The sector, which manages 1.8 million portfolios and 14.3 million stockbroking accounts, is considered high-risk due to the level of assets managed and the gravity of potential harms. The FCA stresses the importance of leadership in understanding and mitigating these risks, pointing out that many issues stem from poor governance and ineffective controls.

To counter financial crime, firms are expected to rigorously understand and manage their risks, avoid superficial compliance checks, maintain effective systems and controls, and report any wrongdoing immediately. The FCA also emphasises the need for firms to fully adopt Consumer Duty by prioritising consumer needs and ensuring that their products and services match the risk profiles and circumstances of their clients. Regular assessment of the value and appropriateness of products is mandatory.

The FCA’s supervision approach is becoming more assertive and data-driven, with increased use of short notice and unannounced visits and formal intervention powers. The letter also touches on the broader regulatory landscape, including operational resilience, market abuse prevention, and the importance of diversity and non-financial misconduct.

In summary, the key takeaways for wealth management and stockbroking firms are to ensure robust management of financial crime risks, full compliance with Consumer Duty, and proactive engagement with the FCA regarding any significant changes or issues. Firms are encouraged to strengthen their systems and controls, enhance consumer protection, and maintain transparent communication with the regulator to foster a safer and more trustworthy financial environment.