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FCA warns on increase in wealth manager scams

The watchdog's business plan revealed it has identified a rise in discretionary portfolios being used for pension scams

FCA warns on increase in wealth manager scams

Wealth management is increasingly being used as a vehicle for financial scams, the Financial Conduct Authority (FCA) has warned. 

The regulator made the revelation in its business plan for the year.  

'We have seen evidence of an increase in wealth managers’ discretionary portfolios being used for pension scams, and poor conduct from wealth managers who make unsuitable investments in
high risk assets for their clients,' The FCA said.

The regulator said its would prioritise its work to 'prevent or reduce harm' in the sector over the coming year. 

FCA chief Andrew Bailey added: 'We will seek to deliver protection for consumers through a continued focus on the culture and governance of the firms we regulate, effective action to reduce financial crime and scams, and prioritising the most serious consumer harms from the activities we regulate.' 

There have been a number of high profile incidents in the discretionary world over the last few years, many of which have led to the collapse of firms. 

The biggest of these was Beaufort Securities, which was declared insolvent in March 2018 by the FCA amid allegations of money laundering.

Private client business Arjent, which at the time handled £100 million in client money, collapsed in 2016 after it emerged its owners had been under investigation by US authorities for four years prior its collapse.

The failure of the firm raised some serious questions about FCA authorisation at the time.

Kent-based Full Circle Asset Management was ordered to compensate a client seeking £1.8 million in damages in December 2017, after it was prosecuted over high risk investments in a medium risk portfolio.  

The FCA's 2017 suitability review identified areas where firms could do more to ensure they provide customers with suitable advice in a clearly communicated way. 

The watchdog is carrying out a second review in 2019 and will publish its findings in 2020. 

'This second review will again examine advice and disclosure firms give to different consumers, across different product types and by different types and sizes of firms,' The FCA said in its business plan.

'It will also provide an updated baseline against which we can assess ongoing issues within the advice market.'      

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