Chris Hewitt from the FSA was speaking at the Institute of Financial Planning’s Paraplanner conference today.
He said the FSA was not averse to the use of centralised investment propositions (CIPS) but were worried that firms would try to shoehorn clients into unsuitable CIPS.
Mr Hewitt said: “The FSA does not have a problem with the use of CIPS and recognises there can be a number of benefits to using them.
“But what the FSA is worried about is clients being shoehorned into CIPS that are not in their best interest and are unsuitable for them.”
He said that regardless of how well the firm had implemented a CIP, it would never be suitable for every client.
“No matter how well a CIP has been targeted to the clients, it won’t be suitable for every client. Some clients will have particular circumstances which just do not fit.
“If you have an unsuitable client, don’t take them on rather than shoehorning them into a unsuitable CIP.”
Mr Hewitt was later joined by FSA technical expert Rory Percival who spoke on rebalancing.
“If you rebalance without customer consent, you need to hold relevant discretionary permissions. To avoid calling the client every time you rebalance, you need to be mechanical, agree with the client in advance what you are going to do and when you are going to do it .
“If you exercise any thought in the process then you need to have the relevant discretionary permissions.”
Other speakers at today’s event include Richard Allum from Paraplan Plus and Edward Grant from Technical Connection.