View more on these topics

Compliance providers defend disclosure template offerings

Sign-Signing-Letter-Contract-Business-700.jpgCompliance service providers have defended their template letters after the FCA’s recent FCA suitability review found more than four in 10 advisers failed to disclose charges adequately.

Many of these advisory firms will have used templates provided by large compliance providers, such as, Threesixty, SimplyBiz and Bankhall.

Despite such large number of advisers failing disclosure tests, these firms say feedback from the regulator did not indicate that there was a problem with the advice compliance services provided.

Instead they say problems emerged from the way some individual advice firms were using their templates.

However, Bankhall says it is looking to redesign its disclosure templates “to make them more customer friendly” in light of the review.

Sesame Bankhall head of compliance Carl Wallis says: “These disclosure templates can be quite dry. I think there is a mindset among some advisers that if a template contains information on three different fee structures, then they should include all this information, even if it’s not relevant to the firm’s practices.”

He adds: “It’s clear that at the initial disclosure stage these documents should be a way of promoting a firm’s services. All the information should be simple to find and easy to understand without the need for any further explanation.”

FCA review finds nearly half of advisers fail on disclosure

Threesixty compliance director, Russell Facer says: “In some cases advisers were using these templates but not tailoring them to reflect their own services.”

For example, there may be information on different fee structures but no clarity on which is likely to apply in this particular case.

Facer says problems can also arise if firms quote an hourly rate, but don’t indicate how many hours a specific task or project is likely to take – or include tiered percentage charges without also expressing these fees in pounds and pence.

There are also concerns that there may still be a lack of confidence among some advisers about being upfront about the value of advice, and what this costs.

The FCA has said many of the problems it encountered involved the initial disclosure stage. It is understood that one in three advisers failed to disclose charges adequately at this stage.

The regulator will be sharing examples of good and bad practice with individual firms – and some compliance providers – in the near future, in a bid to improve standards.

But many advisers are still awaiting the regulator’s next moves on this issue.  Some said they have already incorporated feedback received through their firms, but others said they are still waiting for more clarity from the regulator on the way forward.

Facer adds: “This isn’t a complicated problem. Where advisers have failed to meet disclosure standards, it is fairly straightforward to rectify the problem.”

Suitability review three months on: Has anything changed?

Former FCA technical specialist Rory Percival says: “Frankly this is a high failure rate, particularly at the initial disclosure stage.

“All advisers should be looking again at how they initially communicate information to clients on charges and services.”

Percival says templates can provide a useful framework for advisers to use – but further guidance may need to be given on how firms tailor these to reflect their own practices and the client’s individual circumstances.

But there have been concerns among advisers about whether the review accurately reflects widespread poor practice by IFAs.

West Riding Personal Financial Solutions managing director Neil Liversidge  – who asked to be included in the review – says that initially the FCA found his firm’s disclosure was unsuitable, but this was overturned after he challenged the verdict.

He says: “We were completely upfront about our charging, listing the £695 advice fee, the 1% implementation cost plus 0.75% ongoing charge in the documents sent to clients. Their main objection seemed to be that this information wasn’t ‘all together’, despite being included on consecutive pages of the same document.

“I think any prospective client would be perfectly clear about what our costs are. This makes me wonder whether this many advisers are really failing to disclose costs properly.”

Liversidge says this issue could be resolved if the regulator had one template on costs that all advisers had to use, regardless of the size of the firm.

The FCA reviewed more than 1,000 pieces of individual advice. It published findings in May, which showed that 93.1 per cent of the advice it reviewed was suitable.

However, 41.7 per cent of advisers breached disclosure rules, particularly those relating to costs, charges and services. More than 100 advisers have challenged the FCA’s findings on their files.



FCA set to bring back retirement interest-only mortgages

Advisers could soon have a new product to advise retirees on as the FCA is set to bring back retirement interest-only mortgages to help older borrowers. The regulator says in a consultation paper that it has found a regulatory barrier to helping older borrowers with maturing interest-only mortgages and those wanting to release equity from homes […]

Hargreaves Lansdown

Hargreaves joins ABI as as first platform member

Hargreaves Lansdown is joining the Association of British Insurers with a view to strengthening its representation with government, regulators and other stakeholders. The firm is joining as the ABI’s first platform member. It is not able to join the ABI as a full member because it is not an insurer. The ABI says it wants […]


Prudential goes after 30 more advisers

Prudential is resuming its adviser recruitment drive with plans to hire up to thirty new advisers by the end of the year. Advice arm Prudential Financial Planning began in 2012 with 20 advisers. By 2015 it had 210 advisers, and the firm announced it was targeting a further 40 with a hiring campaign. Currently, Prudential […]


News and expert analysis straight to your inbox

Sign up


There are 7 comments at the moment, we would love to hear your opinion too.

  1. “Liversidge says this issue could be resolved if the regulator had one template on costs that all advisers had to use, regardless of the size of the firm”.

    The regulator did exactly that – the Services and Costs Disclosure Document. The problem was the same as the templates from compliance service providers – poor completion in some cases

    • What I’m asking for is a template that includes the vertically integrated firms, comparison sites, insurance company direct sellers et al. Let’s have everyone playing by the same rules, no smoke and mirrors and/or recognition and acceptance of ‘unique’ charging structures. Correct me if I’m wrong Rory but I don’t think the SCDD did that, did it? I once had the headmistress of a private girls’ school tell me “I use Hargreaves Lansdown because they’re free” to which my reply was “So that’s how Peter Hargreaves got in the Sunday Times rich list?” followed by “I’m sure glad I didn’t waste my money sending my daughters to your school.” Likewise, I’ve met no end of people who think SJP gives free advice. FCA fail there I think, Rory.

      • An SCDD is absolutely not a client specific charging document Rory, it is a generic company document with many assumptions contained therein. I believe Nick Bamford brought the ‘letter of engagement’ subject up recently (a letter which IS client and more charge specific) and suggested this was an area where an exchange of ideas would be useful, in absence of a template from on high; it largely feel on deaf ears unfortunately, as I fear will Neil’s suggestion.

  2. Hiding behind the Advice Industry, the Compliances Industry, (and I say Industry), rather than it being an integral part of the Advice Process’s has been diametrically opposed to the Complaints Industry. Both are incestuous due to the combative nature of the litigious environment we find ourselves in. The very nature of both Compliance and Complaints, coupled by the ever increasing Professional Insurance requirements will force the Advice Process down a quantitative track, Networks rely upon the “Add Hock” File review, so they are expecting certain facts and template paragraphs to be contained within a standard Recommendation letter. Its either that or every single letter should be unique and would require individual consideration by compliance. Therefore we should consider Pre Sales Para Planning more important than post sales compliance, get this right and the Compliance Industry will wither on the vine, which in turn should eradicate the Complaints industry, or at least make both financially unviable.

  3. I’d go beyond Neil’s recommendation of regulatory approved fee disclosure and incorporate regulatory approved ‘status’ disclosure too – remove the subjectivity of statements like ‘whole of market restricted’ and stick with regulatory defined definitions.

    Get the client to sign the document and bingo – a clear record that the client understands the cost and nature of advice.

Leave a comment