The FCA says it is likely to refer two firms to its enforcement division after a thematic review found three in four firms failed to provide the required information on the cost of advice.
The regulator says the two firms likely to be referred to its enforcement and financial crime division had “egregious failings”. One is a financial advice firm and one is a wealth management firm.
The FCA’s latest review into disclosure by financial advisers found too many firms are not being clear with consumers on how much advice costs, the type of service they offer and what on-going services they provide. It found that of the 113 firms involved in the review, 73 per cent failed to provide the required information on the cost of advice.
It found that while failings are widespread across the industry, wealth managers and private banks performed poorer than other firms in nearly all aspects.
The review found that:
- 58 per cent of firms failed to give clients clear upfront generic information on how much their advice might cost;
- 50 per cent of firms failed to give clients clear confirmation on how much advice would cost them as individuals;
- 58 per cent of firms failed to give additional information on charges, for example not highlighting that on-going charges may fluctuate;
- 31 per cent of firms offering a restricted service were not being clear they were restricted, or the nature of the restriction; and
- 34 per cent of firms failed to give clients a clear explanation of the service they offer in return for an ongoing fee and/or their right to cancel this service.
FCA director of supervision Clive Adamson says: “The RDR has involved a major change to the investment advice landscape. While we have seen a lot of positive progress and willingness by advisers to adapt to the new environment, I am disappointed with the results of our latest review looking at whether advisers are clear with their customers on costs and services provided.
“We will be helping the industry again to understand our requirements with the release of a video guide but these results are a wake-up call and we expect the industry to respond.”
The review is the second of a three-cycle assessment of how firms have implemented the disclosure elements of the RDR. The first cycle was published in July 2013 and the third will begin in the third quarter of this year.