The
compliance issues surrounding Wealth Management firms could hardly have passed
those in the industry by. The importance of Know Your Customer information
remains paramount to industry guidelines in order to ensure the consistent
suitability of client portfolios. But a simple pre-requisite of this is that
customer files must be managed effectively – an area which has seen numerous and
continuous failings over the past year.
Despite
the fact that there are clear guidelines in place from industry bodies,
regulators and the wider industry community, many Wealth Management firms have
been found to be holding inaccurate, out-of-date and even incomplete records
about their clients. In December last year, a review by the FSA highlighted
significant and widespread failings of many firms in keeping records that meet
the required standards – a pattern that may well be echoed across the industry and
is a concerning prospect for industry bodies and clients alike.
Firms
are experiencing greater and greater compliance pressures - FATCA, Suitability,
Anti Money Laundering and other pressing legislative and best practice
imperatives continue to crowd in. Processes, systems and structures must
be in place even if companies already have this information. But there is a
question of accuracy and completeness – are these records kept up to date? –
and are they secure? – can they be accessed? The quality of records is
imperative to the appropriateness of client portfolios and activities. After
all, as the FSA found, without accurate records in place, there are often
discrepancies between portfolios sand clients’ attitude to risk and their
investment objectives.
Complacency
is not an option when the consequence of failing to comply can be huge – e.g. a
fine of up to £5,000,000, as well as the potentially calamitous reputational
fall out. In order to avoid such stings, Wealth Managers need to have a system in
place whereby firms can update their records quickly and accurately, as well as
providing ready access should this be necessary to meet regulatory
requirements.
