On 31 December 2012, the FSA introduced new rules to implement the RDR requirements for firms making personal recommendations to retail clients in relation to retail investment products.
These included the new adviser charging rules. For all relevant rules and guidance, firms should refer to the FCA Handbook (in particular, COBS 6.1A and COBS 6.2A).
In July 2013, the FCA published findings from the first part (TR13/5) of a three-stage thematic review to assess how firms have implemented the RDR.
The first-stage findings acknowledged the progress firms had made but highlighted areas where further improvements were necessary, including giving examples of good and poor practice.
After publishing these findings to the sector, the FCA was expecting to see standards improving.
More recently the FCA has completed the second stage of its thematic review, which focused on whether firms describing themselves as independent are acting independently in practice (TR14.5 published on 20 March 2014), and whether firms are complying with the disclosure requirements (TR14/6 published in April 2014). Only 113 firms formed the sample for the second stage.
The results of the disclosure review were disappointing for the regulator, in that a high proportion of firms were found to be failing to correctly disclose to clients the cost of their advice, the type of service they offer (independent or restricted), and the nature of the ongoing service they provided.
Clive Adamson, director of supervision at the FCA said: “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.
Frankly, it seems the FCA believes that the industry has had plenty of opportunity to implement the RDR and its patience is now being stretched“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 on adviser charging revealed that 73 per cent of firms in the sample failed to provide the required generic information on how they charged for advice and/or failed to clearly confirm the specific cost of advice to their individual clients in a timely manner.
In particular:
• 58 per cent of firms failed to give clients clear up front 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.
