FSA gets tough on investment tools

The FSA says adviser firms' over-reliance on risk profiling and asset allocation tools could be seriously detrimental to customers and warns it will take tough action on companies failing in this area.

In a guidance paper out today, the FSA says the level of failure in firms' investment selections is "unacceptable" and identified the use of risk profiling and asset allocation tools as particular areas of concern. Of the 11 risk profiling tools reviewed, the FSA says nine have "weaknesses which could, in certain circumstances, lead to flawed outputs". The paper says: "We expect all types of firms to consider whether they need to improve the way they assess and check the risk a customer is willing and able to take and so ensure they make suitable investment selections. "We encourag...