The Financial Services Authority (FSA) has warned that firms must make sure any rebalancing of clients' portfolios is "entirely mechanical" unless they have discretionary permissions.
The issue was raised at the Institute of Financial Planning's (IFP's) Paraplanner Conference in Nottingham yesterday, during a session on centralised investment propositions and "replacement" business. FSA staff were asked whether firms would have any issues with model portfolios which have automated rebalancing features. Rory Percival, a technical specialist at the FSA, said: "If you rebalance and exercise any discretion or any thought process, and you rebalance without the customer's consent, then you can only do that if you have discretionary permission. "You can, if you do it c...
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