More than 70 per cent of advisory firms have failed to correctly provide the required information on the cost of advice, the FCA has found.
In its latest Thematic Review, the regulator found 73 per cent of firms have failed on disclosure so far, while further failings were identified in relation to the type of service they offer – independent or restricted – and what ongoing services they would provide.
Additionally, 58 per cent of firms failed to give clients clear upfront information on how much advice costs, while 31 per cent offering ‘restricted’ advice were not clear that they were restricted, or the nature of their restriction.
The FCA has some key questions to ask about fee transparency, as detailed in Box 1.
Lorreine Kennedy, head of care fee planning at Carematters in St Albans, said, “For some time now we have emailed or posted our disclosure documents out to our clients prior to our first meeting. So far no one has cancelled as a result of doing this. It actually makes matters easier to deal with when we meet them.”
She added the results of the Thematic Review were disappointing due to the profession receiving negative headlines. “My thoughts are everyone should show their fees and disclosure documents online.”
Kim Barrett, managing director of Hertfordshire-based Barretts Financial Solutions, said he criticises the FCA from a different direction to other advisers. “There was an abysmal lack of publicity surrounding the RDR. We still have clients who have never heard of it,” he said.
The transition has been very tough, he said, as many clients have a polarised view. He says there are clients that understands fees and transparency and others that don’t understand. “There is no middle ground,” he said.
He said it has been the FCA’s failure in not making the public aware on how financial services is dispensed.
Med Evans, managing director of Darwin Wealth Management in Shropshire, said, “I believe the FCA serves our industry well and has the clients at the heart of what if does, as should all advisers. Many advisers do see the FCA as a regulator. It would be refreshing to see the FCA promote the industry they regulate.”
Blair Cann of M Thurlow & Co says, “I believe this whole issue of the clarification of charges is a bee in someone’s bonnet at the FCA. I can think of no other rational explanation.”
“We give them [clients] in each case a written estimate outlining the precise nature of the work we will be undertaking, step by step. We quote a percentage or an hourly rate; for the latter we estimate the number of hours likely to be involved,” he added.
“We have now added an example of the cost as requested by the FCA as follows: ‘This means that if our fee is, say, 1 per cent of £100,000 the cost is £1,000. If our fee is £175 per hour and we say it will take four hours, then the cost is 4 x £175 = £700.’”
He continued, “I am seriously considering adding: ‘We are aware of the fact that you are capable of working this out for yourself but apparently the FCA has no such confidence in your ability.’”
For Andrew Turner, chief executive at TurnKey Mortgages, the FCA is not being too harsh. “It is the responsibility of brokers to be up-front about their charges. We employ a variable fee structure which changes in accordance with the complexity of the customer’s circumstances and the time required to complete the case.”
charlotte.richards@ft.com
