Portfolio letter: Wealth Management and Stockbroking Supervision Strategy

Dear CEO | Release Date: 30th September 2021

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

To access the original FCA document, click here.

Short Summary

The Financial Conduct Authority (FCA) has issued a strategic update to firms in the wealth management and stockbroking sector. This update reaffirms the FCA’s commitment to supervising the sector to mitigate key risks, ensure orderly firm operations, and maintain transparency in costs and charges to protect consumer interests.

Key risks identified include the facilitation of scams, fraud, or market abuse, and the potential for disorderly business failures that could affect client assets. Firms are expected to maintain high standards of data quality to support regulatory compliance and decision-making processes.

The FCA stresses the importance of cultivating a healthy corporate culture that prioritises consumer welfare and aligns with regulatory expectations, including the upcoming ‘Consumer Duty’. This new standard will demand a significant cultural shift towards consistently prioritising consumer outcomes.

The letter also highlights ongoing concerns around diversity and inclusion within the sector. While progress has been noted, the FCA calls for more substantial efforts to establish genuinely inclusive environments that reflect the diverse needs of the community and clients served.

Firms are urged to review their business models against the FCA’s feedback and prepare for compliance with new and existing regulations. They must ensure client portfolios are managed according to individual risk profiles and maintain robust controls against financial crimes and improper conduct.

Key take-away:

Firms must proactively review and enhance their operational and risk management practices, prepare for stricter consumer protection regulations, and foster a corporate culture focused on long-term consumer welfare. Compliance with these directives will be closely monitored, with the FCA ready to intervene where necessary to prevent consumer harm and preserve market integrity.