In letter written to written to 260 firms, the regulator asked them to ensure their clients’ investment portfolios are suitable.
The watchdog said firms have "significant widespread failings" after its investigations revealed that four out of five client portfolios had a "high risk of unsuitability".
The FSA reviewed client files at 16 wealth managers, ranging from small independent advisers to the UK arms of global banks, and found that 14 fell short of basic standards for customer sales.
The regulator said it was especially worried about poor record keeping at the wealth management firms, which meant they did not have basic know-your-client information, or records of the personal financial situations of their clients.
It had also found that investment portfolios did not match the clients’ stated willingness to take risk, or to their personal investment objectives.
FSA said it would be investigating further the problems found in the wealth management industry after publishing the results of its survey of 16 out of the more than 200 firms its regulates.
