The FCA is to probe the financial strength of the wealth sector as it tests the resiliency of financial intermediation during the Coronavirus crisis.

The regulator will send out a survey to all discretionary asset management firms and financial advisers, in an attempt to gauge how the businesses are coping under a range of historical stressors.

Executive director of supervision at the FCA Megan Butler said she wanted to ensure ‘the best possible view’ of the effect the crisis and safeguarding clients was ‘absolutely central to our focus in the wealth management sector’.

Butler said: ‘We are already beginning to see a key impact of the Covid-19, in a significant downward pressure on many firms revenues, and we already know that declining market values will lead to significant financial pressure on investment management fee incomes.

‘Financial viability concerns already present in some firms will be amplified and otherwise financial sound firms may become vulnerable. 

To make sure that we have got the best possible view of the effect this crisis is having on firm’s financial resilience, you will be receiving a short, simple impact survey on Monday.’

In addition, Butler added said that the regulator’s main focus would be to preserve client’s money trapped in those firms who will be forced to exit the market.

‘We are also aware that a number of firms provide service to clients that result in firms holding client money and custody assets. In the current climate we cannot duck the fact that some of these firms may exit the market altogether,’ she said.

In these circumstances it is imperative to minimise any delay in the return of client money and custody assets. So to take action ahead of time to prevent shortfalls in what they should be holding on their clients behalf. 

To that end the preservation of clients money is absolutely central to our focus in the wealth management sector.’

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