Speaking at the Association of Private Client Investment Managers and Stockbrokers Compliance Conference, the FCA director of supervision, Clive Adamson, said that the new supervision model would focus more on looking at the business models of firms, strategies, culture and front-line processes, rather than the traditional approach of focusing on controls.

"Essentially, it is a shift from looking at how a firm controls itself to how it runs itself. The reason for this is that we believe these areas are some of the primary drivers of poor behaviours," Adamson said.

In his speech, Adamson warned of further thematic reviews and also highlighted a number of key areas that wealth management and private banking firms needed to focus on, including oversight arrangements, the recording of up-to-date consumer information and identifying and managing conflicts of interest.

"Firms must deliver the services customers have signed up for, agreeing upfront the exact nature of the service they provide and ensure that their customers’ wealth is legitimately acquired," Adamson said.

Adamson also explained that firms needed to ensure portfolios were consistent with customer objectives and record and keep up-to-date consumer information in order to ensure their individual portfolios continue to be suitable for them.

Rebecca Prestage, head of policy at The Consulting Consortium, said there was a real danger of consumer detriment if firms did not address the issues that had been identified.

“It’s vital that the right corporate culture transcends the entire firm and that senior management set the tone for the rest of their staff. Firms must make sure that they can demonstrate that their business model, strategy and culture puts the customer first," Prestage said.

Laurence Lieberman, partner in the disputes and resolution team at Taylor Wessing, says wealth management firms can expect a more intrusive, challenging and proactive approach by the regulator to supervision.

“The FCA has again turned the spotlight on wealth management, outlining plans to increase scrutiny of the sector, with the launch of a new wealth management and private banking department, planned for 15 July. Essentially it will seek to illuminate the broader picture and consider firms' business models, culture, front-line experience and what outcomes are being achieved for customers rather than a narrow focus on whether a firm complies with rules," he said.   

“As a result, firms can expect more thematic reviews and the use by the FCA of more data and intelligence to make sure `markets work well for consumers'. Wealth managers are advised to heed Adamson's warning that while the FCA is in the final stages of setting up the new department and pending further thematic reviews, firms should focus on a number of key areas. These include ensuring that they deliver the services customers have signed up for, ensuring the exact nature of the service they will provide is agreed and recorded at the start of the relationship, and keeping all information current and relevant.  He emphasised the importance of portfolios being consistent with consumer objectives, noting that if a customer's attitude to risk is unclear or inadequately recorded, we will question why," he added.   

The FCA took over as the UK's financial regulator earlier this year following the break up of the Financial Services Authority.