Regulators will establish a dedicated wealth management department within the incoming Financial Conduct Authority (FCA) that will help "intensify" the regulatory focus on the sector.
Current Financial Services Authority (FSA) managing director Martin Wheatley announced the plans after criticising the 'minority' of wealth managers who are letting their customers down by recommending unsuitable investments.
In a speech delievered to the Chartered Institute for Securities & Investment (CISI), Wheatley (pictured) said the regulator had uncovered examples of managers failing to gather the proper information from customers and then placing money into unsuitable portfolios.
Wheatley said the issues were also evident in the FSA's recent review of investment advice given by six major high street banks.
That mystery shopping exercise found that, in 15% of cases, the bank 'adviser' had not properly ascertained the level of risk customers were willing and able to take.
"One of the major concerns I have, one of the concerns the FSA has, is that there are wealth managers in the industry who can't hold their hands up and genuinely claim to be providing a great service to their customers," Wheatley said.
"I don't for one minute think we're talking about a huge majority here. But the evidence tells us that some managers are failing to gather and record basic, up-todate information from clients: their objectives; their capacity for loss; their liquidity requirements; their time horizons. All pretty standard stuff."
He added: "There is work to do here. We need to hear more managers asking the right questions to their clients. What is your appetite for risk? What capacity of loss are you able and willing to take? Do you expect income or growth? What are your targets?"
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