UK watchdog warns on 'rise of scams' in wealth management

Wealth management is increasingly being used as a vehicle for financial scams, the Financial Conduct Authority (FCA) has warned.
In its business plan the regulator again warned many scams are being hidden in DFMs' portfolios.
"We have seen evidence of an increase in wealth managers' discretionary portfolios being used for pension scams, and poor conduct from wealth managers who make unsuitable investments in high-risk assets for their clients. Our activities will improve our ability to prevent or reduce harm in this area," the regulator said.
We have seen evidence of an increase in wealth managers' discretionary portfolios being used for pension scams, and poor conduct from wealth managers who make unsuitable investments in high-risk assets for their clients"
The regulator added its would prioritise its work to "prevent or reduce harm" in the sector over the coming year.
The actions it will take include examining the levels of disclosure and quality of advice given to consumers.
"We will seek to deliver protection for consumers through a continued focus on the culture and governance of the firms we regulate, effective action to reduce financial crime and scams, and prioritising the most serious consumer harms from the activities we regulate," FCA chief Andrew Bailey added.
Over the past couple of years, there have been a number of high-profile collapses of DFMs, many of which held investments in illiquid assets. In many cases, these failures led to Financial Services Compensation Scheme pay-outs.
The regulator is also set on cracking down on financial crime, such as money laundering.
The business plan stated: "We are using the data we receive from our annual financial crime return for firms, together with a range of data and intelligence, to allow us to monitor trends in financial crime.
"We are also strengthening our ability to use technology to target criminals. We will use more advanced data analytics and machine learning techniques against money launderers and other financial criminals."
Charles Randell, chairman of the FCA, said: "Technology is changing the way that financial firms do business and the way that consumers engage with their financial decisions.
"Technology change brings risks to the operational resilience of our financial system and to the accountability of firms for the effects of decisions taken by machines.
"It also brings risks to consumers who may be enabled to take decisions too quickly or with inadequate advice; may be exposed to more financial scams; or may struggle to participate in a technology-driven world.
"Technology change also brings risks to regulators, who may lag behind developments or lack skills and resources to match the changing risk landscape.
"But technology change can also bring opportunities for innovation, lower costs and greater participation which will benefit consumers."