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Review shows advisory firms not clear enough on their charges and services

Thursday 10th April 2014

Too many advisory firms are not being clear enough with consumers on advice costs, the type of service they offer and what on-going services they provide. The Financial Conduct Authority’s (FCA) latest review into disclosure by financial advisers found that 73 per cent of firms failed to provide the required information on the cost of advice.  
 
Clive Adamson, director of supervision at the FCA commented: “RDR has involved a major change to the investment advice landscape. While we have seen a lot of positive progress and willingness by advisors to adapt to the new environment, I am disappointed with the results of our latest review looking at whether advisors 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 latest review is the second of a three-cycle assessment of how firms have implemented the disclosure elements of the Retail Distribution Review (RDR). The RDR, which came into force at the beginning of 2013, introduced new disclosure requirements to improve transparency for consumers. The aim was to ensure that consumers have the information needed to make informed decisions, and are clear on the costs and services of advisory firms to improve competition in the market. 
 
In the latest research, despite sufficient time and the straightforward nature of the requirements, issues remain. In particular, the second cycle found that:
 
- 58% of firms failed to give clients clear upfront generic information on how much their advice might cost;
- 50% of firms failed to give clients clear confirmation on how much advice would cost them as individuals;
- 58% of firms failed to give additional information on charges, for example not highlighting that on-going charges may fluctuate;
- 31% of firms offering a ‘restricted’ service (they cannot advise on the full range of financial products and providers available) 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. 
 





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Editorial Contact Details - Conor Shilling
conor.shilling@angelsmedia.co.uk
0845 672 6000
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