In its recently published “Assessing Suitability Review” document, the FCA has found that many firms are now providing adequate suitability checking on their clients’ portfolios – but at what cost to their businesses and to their clients?
In the JHC “Optimising Compliance in Uncertain Times” report, JHC surveyed compliance processing at a selection of private banks, investment managers and wealth managers, it was clear the process of reviewing the ongoing suitability of their clients’ portfolios is labour intensive, error prone and costly. There was a wide variation on how often the reviews were carried out, with some firms taking three months or even longer to complete the review.
Furthermore, the FCA have announced they will be revisiting firms’ suitability processes again. What will they find in one, two, three years out? In our survey of market participants, we discovered that almost a quarter of firms had a completely manual suitability review process, and none had a fully automated system. Is this high level of manual suitability monitoring sustainable? Should firms be looking at ways to introduce more efficient and cost effective processing to not only facilitate growth but also ensure the highest level of suitability monitoring to protect the end client?
Budgets are finite and many firms are concerned that regulatory IT costs are crowding out spend that could be used to enhance the client relationship and deliver greater value to the business.
When the FCA revisits suitability, firms will want to ensure their monitoring has evolved into a consistent, proactive, reliable, scalable and automated process. They will expect alerts as soon as an issue arises, rather than trying to manually identify issues from historical data and hoping to have time to repair the damage done. Every Investment Manager wants to spend more time with their clients, safe in the knowledge that suitability is being proactively monitored.
To download our full “Optimising Compliance in Uncertain Times” report, please click here
