In the first of a three-stage thematic review into how advisory firms have implemented the RDR, the regulator said today (Thursday) that some charging structures remained confusing.
The six-month update drew on research undertaken by the regulator between February and April.
While stating that a majority of firms had made progress and demonstrated a willingness to adapt to the new rules, the 14-page review paper also highlighted that some were providing charges in percentages, rather than cash terms.
Furthermore, the paper revealed some firms fell down by not being clear about what services they would provide for ongoing fees.
Examples of a lack of clarity with charging included advisers charging for initial advice in cash terms, and then imposing an ongoing adviser charge as a percentage of the amount invested.
The paper said: “Even if cash terms are included, firms should also ensure that their disclosure is sufficiently clear for a client to understand the total likely costs.
“We found that some firms’ charging structures that included hourly rates did not provide sufficient information.”
Clive Adamson, director of supervision at the FCA, said: “RDR was a major policy development, so it’s right that we are acting on behalf of customers to see whether the significant changes are working for them.
“The research for this report was undertaken just a few months after the implementation of RDR, so provides an early snapshot of what has changed.”
He added: “This early view shows that, while firms have acted, they still have more to do to if a customer is going to be in the best possible position to understand the price they will pay and the service they will get for that price.
“Firms should carefully consider the feedback covered in this report. We strongly encourage advisers to look at the examples highlighted, and take immediate steps to help their customers better understand the charges and services being offered.”
The review also raised concerns about post-RDR proposition disclosure, claiming firms were not being “upfront” about whether they had a restricted or independent proposition.
The regulator has also sent 6000 factsheets to firms on how to disclose charges and services in line with the new regulations.
