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FCA review finds nearly half of advisers fail on disclosure

45 per cent either fail or unclear on FCA disclosure rules

The FCA has released the results of its long-awaited review of advice suitability, with the vast majority of advisers coming out with a clean bill of health on suitability but failing to disclose charges in line with the regulator’s rules.

The regulator first launched a review of more than 1,000 individual pieces of advice last April. 656 firms were tested against the FCA’s suitability and disclosure rules.

93.1 per cent of the cases showed suitable advice, the FCA said today. 4.3 per cent were unsuitable and a further 2.5 per cent were unclear.

The FCA said that the findings would help it communicate good and bad practice and focus its resources on firms and areas that pose the greatest consumer risk, but it did not say it had decided to take enforcement action against firms that failed.

The FCA said: “We consider that these are positive results for the sector. We believe they are a result of the successful adoption of the RDR by advisers and reinforced by our previous supervisory and enforcement activities.”

However, 41.7 per cent of advice breached disclosure rules and was described as uncertain in 5.4 per cent of cases.

Initial disclosure of costs and services was the main stumbling block for firms.

The FCA said: “The overwhelming issues were: firms disclosing charging structures with wide ranges; and firms using hourly charging rates failing to provide an indication of the number of hours for the provision of each service, rather than firms failing to provide any cost information. The disclosure results demonstrate there is further work required in this area. ”

Ideas Lab director Robert Reid. “Disclosure is the far bigger problem. You should already be disclosing your pounds and pence costs in your suitability report.”

Over the rest of the year and 2018 the FCA will embark on a communication campaign to deliver good and bad practice on suitability and disclosure, and will conduct a similar review in 2019 to see how advisers have reacted to upcoming Mifid and Priips regulations.


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There are 21 comments at the moment, we would love to hear your opinion too.

  1. Usual B——s

  2. The typical diclosure document and suitability report reads like a telephone directory. Any more ‘clarity’ will only end up muddying the waters.

    havent we been here many times?

  3. Ok, before we completely destroy any trust in IFA’s, lets have the numbers split between the size of Companies that were researched. I bet that the smaller IFA firms were 100% in Suitability and disclosure!! FCA, get off your a….es and try to HELP the Financial Services ‘Profession’!! Not HINDER it with part ‘disclosure’ of your research!! I am aghast after only 10 years in the profession that NOTHING seems to have moved on with the REGULATOR taking a lead in ENHANCING the GREAT services of the smaller IFAs as against the decidedly POOR services of the monolithic Financial Service Companies that seem to do what they want if they want!!
    Phoenix – 34% MVR’s, Nationwide 5% pa interest that is really only 2.5%, SJP that subsidise the advice side and pretend to have ‘Partners’ when they are ‘salespeople’, Banks / BS paying 0.01% pa interest, GOVT encouraging people to gamble £50,000 in Premium Bonds pretending that the money is ‘safe’ when it is subject to INFLATION RISK etc etc. Rant over and back to helping Clients save tax and save for their COMFORTABLE retirement despite GOVT. attempts to stop me at every level – MPAA cut, Dividend cut, LTA cut L(ies)ISA, plans for more Pension interference, see Centre For Policy Studies report 2017 –

    • Why don’t you read the report Ted.

    • Ted – I’ve been in for 23 years now and I can assure you of one thing- they are useless! Constantly looking under the wrong rock at the wrong time and when you need some helpful input they are nowhere to be found. They have little practical experience and I doubt many have any FS qualifications or actual hands on knowledge yet they are empowered to oversee us. Might as well put me in charge of a nuclear power plant as I am equally qualified by comparison ( I use electricity).

    • Ted. If you read the report you will see that small, directly authorised IFAS actually came out worse than larger firms, networks and restricted firms for both suitability and disclosure, significantly worse in relation to disclosure

  4. We were in the review.... 18th May 2017 at 11:30 am

    Having had the feedback from the FCA as part of the review, we were obviously pleased that the suitability was fine. The disclosure document which had been “approved” by our Compliance Support firm which was disappointing.

    The reasons for being unacceptable, we found a bit “petty” as in the article here. We did not have enough examples in the document and obviously the client can not be expected to extrapolate, interpolate or calculate.

    I would really like to see the disclosure documents provided to the FCA from the “magic circle” law firms who carry out work for them. Or the accountants, consultancies and other professional firms that work for the regulator. If they are anything like the documents we get, there is considerably more disclosure in our profession than in all of the others I have dealt with.

  5. So 4.3% of cases were found to fail the suitability ‘test’ and a further 2.5% ‘unclear’.

    This is rather at odds with the FCA’s thematic review of December 2015 and a third of cases considered ‘bad’ and another third ‘questionable’.

    Has the advice sector really changed its suitability processes so drastically in only 18 months or has the FCA decided that 94% of advice was ‘suitable’ after all.

  6. Should the headline here not be “93.1% of advice cases reviewed were found to be suitable”!! Is that not more newsworthy!

  7. The want the answer to ” how long is a piece of string!” The only clear way is fixed fee and all firms will then cost on a worst case scenario to ensure that the “fee adequately covers the process” driving the cost that most are willing to pay even higher. If you spend 20 minutes on hold to a Pension Trustee or provider one on one case but 15 times 20 minutes on the next, the costs increases.

    Madness lies in this, ask you accountant how much it will cost to fight a tax inquiry and see how many can tell you! Same with litigation!

  8. Shouldn’t the FCA / MM also declare the Numbers not just the percentages?

  9. @ Matthew and @Rory Pervival
    Without the actual numbers the reoport means nothing, how many of each size and how many within each size were researched?
    “There are three kinds of Lies; Lies, Damned Lies and Statistics – Benjamin Disraeli
    25% of accidents are caused by drunken drivers, ergo 75 % are caused by stone cold sober drivers! QED

    • The report states it was representative, if you know a little about statistics then you will understand that means it represents the structure/make-up of the current market.

      Adding numbers would only make that less clear as there is no context to them.

  10. If there is no context to the numbers what on earth does the research represent? Where is the underlying detail? “Representative” of what exactly?

    • Representative of the advice market! Are you being deliberately obtuse – Read the report and it will become much clearer.

      You need to take a breath now and again Ted, there is no reason to get so angry about this.

  11. I read it with a growing feeling of optimism.

    It would be better if the regulator did not delay in publishing the detail though. Dragging it out through 2017/18 might be good for them less so for regulated firms.

    The disclosure part seems like the easiest nut to crack. They want more examples where the adviser charges an hourly rate. Even if it’s imprecise at the start I imagine most advisers would be able to come up with meaningful examples based on their experience.

    Interestingly (1.8) it wasn’t that firms were failing to provide any cost information more that they were disclosing charging structures with wide ranges.i can’t wait to see the detail of that and what it means

    Looks like an overall A- score

    • Agreed Nick. We can not get it 100% correct 100% of the time but I think this is the most positive news for advisers to come from the Regulator in the 30 years of its various existence. For Linda Goodall to say that consumers who approach and engage with advisers should have confidence the advice they get is suitable. FFS if this sis not something that should hit the headlines I don’t know what is. Chaps and “chapess’s” take a pat on the back. All we need now is for some regulatory dividend for “doing it right” and we should all be happy

  12. But the headline says “FCA review finds nearly half of advisers fail on disclosure”. @matthew I am not “angry” just bemused, frustrated at the negativity and wish MM would have some positive IFA headlines. Btw I did read the report and it is still nonsenical without the detailed numbers

  13. I seem to recall an FCA review that said that firm’s disclosure was wrong because firms allowed clients to pay by instalments – but apparently you always could (again according to the FCA latterly interpreting the handbook differently to suit themselves following FAMR criticism).
    Based on evidence, the FCA do not understand how some firms charge let alone work. Sadly I also think other IFAs do not believing their way is right. That is fine, but do not condemn those who get it wrong.
    Frankly the FCA does not understand how some small firms work as evidenced that feels it should be possible to shop around for advice using website disclosure! Rory Percival simply failed to engage with us using the analogy of kitchen modifications – how can you cost a kitchen using hourly rates if you do not know the scope of the work involved, the risk, the liability. As for how long it would take for each rate – OMG. You do not know! Also, it is a fact that clients do take three time longer to do for them what is outwardly similar work! Timesheets are the evidence. To avoid this problem it is essential to discuss what the client actually needs since frankly they often do not know what they need. Then it can be costed on a fair and reasonable basis before any charge is made. Advice CANNOT be commoditised.
    Respect for the FCA has totally gone and I feel now that there is a real agenda against small IFAs.

  14. Having read the report in detail over the weekend a couple of things really stand out to me :

    1. Disclosure was only deemed acceptable by 39.5% of Independent firms (section 4.6) which is far below the 75% achieved by restricted firms. What is causing this? 39.5% ‘success’ is a shocking figure but why so far behind restricted advisers?
    2. Clients are three times more likely to receive advice deemed not to be suitable from an Independent firm as opposed to a restricted firm (section 3.8). Given that independent advice is supposedly the ‘gold standard’ this is a hugely disappointing statistic.

    The outcome of this can only be further regulatory pressure on IFAs as opposed to restricted advisers.

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