FCA sets out expectations for the wealth management and stockbroking sectors

The FCA has sent a 'Dear CEO' letter (dated 16 September 2021) to firms active in the wealth management and stockbroking sector. The letter provides an update, following its letter in June 2019, of the key harms in this sector, the FCA's work in this area and its expectations.

The key harms and expectations are identified as follows:

• Fraud, investment scams and market abuse: The FCA expects firms to ensure client portfolios are managed in line with individual client risk profiles. Where portfolios include high-risk or unregulated investments, this must be fully justified by the client's risk profile and due diligence on the investment. The FCA also expects firms to have robust systems and controls to mitigate the risks.
• Financial resilience and disorderly firm failure: The FCA expects firms to undertake regulator reviews of the adequacy of its capital and liquidity as well as ensure that it understands the impact of the incoming Investment Firm Prudential Regime (IFPR). The FCA also reminds firms of winddown plans and of its CASS rules.
• Costs and charges: The FCA expects firms to have clear systems and processes for collecting and aggregating all the data that is relevant to both ex-ante and ex-post costs and charges disclosures. How these disclosures are provided to consumers, both in terms of timing and content, should also be considered and monitored by firms. The FCA will consider undertaking thematic work, both around the disclosures themselves and how they have contributed to firms' consideration of consumer outcomes.
• Brexit: The FCA expects firms to have considered the changes made to the Handbook to reflect Brexit and the FCA's approach to using the temporary transitional power which ends on 31 March 2022.