Wealth managers, whose focus is on individuals, are badly served by being lumped in with “banks” and are straining to cope with aggressive compliance requirements from the FCA, says Simon Culhane, Chartered FCSI and CEO of the Chartered Institute for Securities & Investment (CISI).

In the latest edition of Securities & Investment Review, the magazine for the 40,000 strong CISI membership, Mr Culhane discusses the rising costs of compliance for wealth management firms.

Simon Culhane, Chartered FCSI
Simon Culhane, Chartered FCSI

Since it opened for business almost two years ago, the Financial Conduct Authority (FCA) has honed its reputation for being tough and levying huge fines, says the magazine. Just before Christmas its outgoing chief of supervision acknowledged in a Parliamentary hearing that the FCA may have “gone too far” in its aggressive stance. Combined with a never-ending flow of new regulation from London, Europe and the US, complaints about the strain are bound to mount.

“Nobody doubts the paramount need to protect consumers and to ensure the fair and effective operation of markets. Wealth managers, whose focus is on individuals, are badly served by being lumped in with ‘banks’, the source of scandals, which have lost much trust and prestige in recent years. Even in a digital age, the wealth managers have a much more intimate, personal relationship with their clients, not least because all their customers can clearly see how well or badly their advisers are performing, certainly year on year, against a number of measures,” says Mr Culhane.

Topping the regulatory requirements right now, says the magazine, and for most firms the recent workload to meet them, is “Suitability” – the exercise by which wealth management firms must assess the circumstances of every new and existing client to ensure that customers’ portfolios are invested in suitable products and services. Suitability is very important, introducing more objectivity into the process of weighing up clients’ needs, with ”fact find” and  “risk appetite” exercises.


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“The new Senior Managers Regime currently being propagated by both regulators throughout the industry, and due to be implemented this summer, will focus many minds on individual responsibilities, both to their institutions and to their clients. Investors’ perceptions of risk and attitudes towards it are notoriously hard to measure, which has been part of the problem in preparing the groundwork for the Suitability checks,” says Mr Culhane.

To help address some of the problems the FCA has been actively encouraging technology developments in wealth management; online is here to stay and is developing rapidly. While the regulator has made clear that there is “no such thing as simplified” with Suitability, and that complaints would lead to fines down the line, it has acknowledged that “some firms are uncertain on the suitability standards for delivering personal recommendations online.” It is giving further clarification on this.

“Technology, as in so much of finance, has the potential to change all of our lives – firms’ and clients’ – for the better, and sooner than many expect. More red tape will only slow progress or, worse, put it into reverse,” said Mr Culhane.

A recent BBA survey revealed that the sector oversees £524 billion and contributes £5.5 billion to the economy, directly employing around 23,000 people and supporting the employment of another 42,000.