Nearly three quarters of firms are still failing to show clients the true cost of advice, the regulator has found in what it calls a "wake-up call" for the industry which has already put two firms at risk of enforcement action.
Too many advisory firms are not being clear with consumers on how much advice costs, the type of service they offer - whether it is restricted and the nature of the restriction - and what on-going services they provide, the Financial Conduct Authority (FCA) said.
It is likely two firms with "egregious failings" will be referred to the FCA's Enforcement and Financial Crime Division, the regulator said. This includes one financial advisory firm and one wealth management firm.
The results are part of the regulator's second review into the implementation of the Retail Distribution Review (RDR), the rule change which came into force on 1 January 2013.
FCA director of supervision Clive Adamson said the regulator has seen a lot of positive progress and willingness among advisers to adapt to the new environment, but that it was "disappointed" with the results of the latest review.
"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," he said.
In the latest research, the FCA said issues remain "despite sufficient time and the straightforward nature of the requirements".
The FCA found 58% of firms failed to give clients clear upfront generic information on how much their advice might cost, and half of firms failed to give clients clear confirmation on how much advice would cost them as individuals.
Also 58% of firms failed to give additional information on charges, for example not highlighting that on-going charges may fluctuate.
A third of firms offering a ‘restricted' service were not being clear they were restricted, or the nature of the restriction, and 34% 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.
Whilst failings appear widespread across the industry, wealth managers and private banks performed poorer than other firms in nearly all aspects, the FCA said.
The regulator believes the failings identified in its latest review suggest some consumers could be unaware of, or even mis-led, in relation to the cost of advice - both initial and ongoing- , the type of service offered by a firm - whether it's independent or restricted- , the nature of a firm's restriction, or the service they can expect to receive in return for the on-going fee.
The FCA will be starting the third cycle of its review in disclosure in the third quarter of 2014. If, at that point, firms are not complying with the rules on disclosure, the FCA has said it will consider further regulatory action, including referrals to enforcement.
A number of tools have been made available to firms, including examples of good and poor practice and a factsheet, both published in 2013.
To further help firms, the FCA has produced a new video that provides an overview of the key disclosure requirements.
As part of its review into disclosure, the FCA looked into how advisory firms describing themselves as independent were using the label. The review found that most firms appeared to be using the independent label accurately.
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