Five firms could face a probe by FCA enforcement officers after failing to show the suitability of clients’ investment portfolios.

A report, published this morning, showed a third of wealth managers surveyed by the FCA still “fell substantially short of expected standards”.

The thematic review concluded that “some firms need to make substantial improvements in client information practices as well as ensuring the portfolios they manage truly reflect the needs and risk appetite of their customers”.

Officials said five unnamed firms may be “required to undertake significant remediation programmes to raise standards” to ensure they can consistently show the suitability of clients’ investment portfolios in future.

The report stated: “Some of these exercises may involve us using our regulatory powers such as the appointment of a third party (skilled person) and we are considering the use of our enforcement investigation powers.”

Six firms may be asked to devise and implement a plan to “remedy the shortfalls identified”.

The report stated: “We want all firms providing discretionary and advisory portfolio management services to retail customers to review our findings, consider whether any of the issues we have identified apply to their own businesses, and take action where necessary.”

The regulator said there were some encouraging signs of good practices and progress since its last review. The proportion of high risk or unclear files fell from 79% to 59%.

But it said: “Disappointingly, we also uncovered a number of poor practices and are working with firms to ensure they undertake action in the areas of concern and that they are aware of the need to raise standards.”

Megan Butler, FCA director of supervision, investment, wholesale and specialists, said: “The UK wealth management industry plays a vital role in delivering financial services. It is positive that a number of firms have taken steps to improve and demonstrate the suitability of their clients’ investment portfolios.

“We are concerned, however, that some do not appear to have heeded the messages we have put out in recent years, and taken steps to identify and correct problems we’ve previously identified. Getting suitability right is fundamental to providing a portfolio management service that meets customers’ needs.”