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Navigating the New FCA Expectations: A Guide for Wealth Management and Stockbroking Firms Using Portfolio Rebalancing Systems

By 13 December 2023No Comments


The Financial Conduct Authority (FCA) has recently issued a comprehensive “Dear CEO” letter, outlining its heightened expectations for wealth management and stockbroking firms. This directive emphasizes the importance of ensuring optimal client outcomes, a principle at the heart of Financial Simplicity’s ethos. In this article, we delve into the key aspects of the FCA’s guidance, focusing on portfolio management, operational resilience, and the alignment of services with client needs.

FCA’s Emphasis on Client Outcomes

The FCA’s letter makes it clear that the authority is leaving no stone unturned in its pursuit of ensuring the best possible outcomes for clients. This includes a thorough examination of products and services offered by firms, ensuring they are not only compliant but also genuinely beneficial to clients.

The Importance of Rebalancing Portfolios

Rebalancing portfolios is more than a mere feature; it’s akin to conducting a client portfolio review. It involves assessing the current investment strategy and making adjustments to align with the client’s evolving needs, market conditions and professional research.

In-House vs. Outsourced Solutions

When it comes to rebalancing and portfolio management, firms face the choice of managing these processes in-house or outsourcing them. The FCA urges firms to ensure that their internal systems are resilient (read no spreadsheets) and efficient if they choose to handle these tasks internally. On the other hand, outsourcing, even to a regulated business, does not automatically guarantee favourable client outcomes. Due diligence is essential, and firms must take full responsibility for the services provided on their behalf. Questions should be asked as to how the rebalancing was designed, what is the philosophy behind it, how does it lead to best consumer outcomes, and could it trigger actions that put the consumer at harm.

Alignment with Customer Needs

A crucial aspect of the FCA’s expectations is the alignment of services with customer needs. It’s not enough for a service to exist; its design and implementation must clearly support and enhance client outcomes. This means providing transparent explanations of how services like portfolio rebalancing work and ensuring they do not inadvertently harm clients, such as triggering unnecessary capital gains tax liabilities.

The Complexity of Client-Specific Outcomes

Client outcomes, especially in terms of rebalancing, are highly individualized. They depend on the client’s investment goals, risk tolerance, and personal financial situation. The FCA’s directive encourages firms to consider these factors carefully, ensuring that any rebalancing or portfolio adjustments truly serve the client’s best interests. A ‘one size fits all’ approach may just not be sufficient.

Innovative Solutions from Financial Simplicity

In response to these evolving regulatory expectations, Financial Simplicity has been at the forefront of developing advanced client centric solutions. Financial Simplicity has moved way beyond the simple product or asset allocation rebalancing, and recognizes this as a critical process, ensuring that each client’s unique circumstances are considered in portfolio management.Our approach involves using sophisticated mathematical models to address the complexities inherent in aligning model portfolio management with each client’s specific situation. We believe this tailored approach is crucial for achieving the best client outcomes, and hence meeting the regulatory standards.


The FCA’s recent guidance serves as a reminder of the critical importance of client-centric service in the wealth management and stockbroking sector. Firms must rigorously assess their products, services, and operational processes to ensure they align with client needs and regulatory expectations. At Financial Simplicity, we are committed to this journey, continually advancing our services to meet and exceed these standards for the benefit of our clients, and their clients also.

If you are at all concerned about scrutiny from the FCA (or any other regulator) about your firms internal or outsourced portfolio review and rebalancing processes, contact us for a confidential discussion.

Stuart Holdsworth

Author Stuart Holdsworth

Stuart has over 30 years of experience in the use of technology for the strategic competitive advantage of businesses in the financial markets and investment industry.

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