The FCA will again shine the spotlight on the investment industry this year: here Investment Week highlights the key issues flagged by the regulator in today's Risk Outlook 2014.
One area of interest for the regulator is wealth managers and private banks' use of in-house funds. The FCA said it will assess how these firms "effectively control the conflicts of interest that arise when client assets are invested in in-house investments."
Another risk, the FCA said, is the danger of IFAs being given misinformation regarding a particular product - notably in the active management space.
The report said: “There may be wholesale product providers, who push products to IFAs, reinforcing incorrect or unfounded views about them (for example, the benefits that active fund management can offer to clients and the justifications used for this).”
The mis-sale of interest rate swaps is one example of consumer detriment, it said, while complex products such as structured retail products also make it difficult for consumers to compare risks and costs.
Identifying conflicts of interest also remains a priority for the FCA. The report singled out asset managers’ use of client funds to buy services: “Poor management of conflicts by asset managers when dealing with investment banks and other suppliers of services could lead to a failure to manage client costs appropriately.”
In the market more generally, the FCA warned rapid portfolio adjustments could create liquidity pressures in certain markets, such as corporate bonds.
It also shed a little more light on its worries over execution-only platform services. The regulator is in the midst of a thematic review of the space, but today flagged the risk that consumers may incorrectly believe they are receiving advice.
"There is also a risk that, without well-designed systems, there is a lack of clarity and that consumers using non-advised services may believe they are receiving advice when they are not," the regulator said.
