FCA in mass file check to review advice suitability

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The FCA is writing to around 700 advice firms ahead of a supervision exercise focusing on the suitability of advice.

The regulator will collect over 1,000 client files in total as part of the exercise, with file requests mainly targeted at 500 smaller firms. Larger firms will have to provide a greater number of files, which should reflect the business’s market share.

File reviews are expected to centre around assessing suitability, including copies of suitability reports and the way firms document their investment and research processes.

In the FCA’s 2016/17 business plan, published earlier this month, the regulator identified suitability as one of its key risk areas for the coming year.

It said: “Advisers may not always give consumers the most suitable investment advice, may offer a limited range of products or have staff reward schemes that motivate sales over suitability.”

The business plan added: “Our supervisory focus will continue to be on supporting increased professionalism in the financial advice sector.

“We will increase our communications with the sector and continue to assess how suitable advice is, monitoring any changes that result from implementing proposals from the Financial Advice Market Review.”

The FCA published a six-page report in February into adviser due diligence, after almost two years of work via a thematic review.

Following the review, one firm has been ordered to carry out a past business review and three more have been told to improve their processes.