Dear CEO Wealth


Dear (Wealth Manager) CEO …a headache building up?

In December 2012 the FSA wrote to the CEO of major asset management businesses in the UK to warn of over-reliance on outsource service providers.  From a wealth manager perspective, this regulatory initiative, and the work that followed, might seem a long time ago in a galaxy far, far away…but this probably is a headache after all.

Maybe it doesn’t feel so bad…

  • Wealth managers are a different proposition:
    • Most are significantly smaller in AUM than the large asset managers originally targeted by the FSA letter;
    • Outsourcing models in our world are simpler than those of global asset management groups, operating in one jurisdiction substantially and with one relationship to manage.

 Actually it still hurts because…

  • FCA expectations are clear:
    • What was sauce for the (institutional) goose is sauce for the (wealth manager) gander – we cannot expect different standards than applied to our institutional cousins;
    • We deal directly with end investor clients; if our business is incapacitated by outsource provider failure we cannot deliver good client outcomes.

 Oh no; the pain seems to be getting worse…

  • Wealth managers generally have not addressed the question in any detail:
    • Responding to the Dear CEO expectations is not difficult, but requesting the service provider Resolution Plan will not be enough;
    • The FCA will be including this topic on the routine agenda for an inspection visit for wealth managers; they risk “disappointment”.

Hand me the painkillers – this feels like a migraine coming on!

By George Kirby

George is a management consultant within the Wealth Management Practice at Knadel. His consulting roles include working with large and smaller wealth managers, private banks and service and software providers.

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