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Advisers split over FCA ‘best practice’ on fee disclosure

Advisers split over FCA ‘best practice’ on fee disclosure

The Financial Conduct Authority has clarified that while it is “good practice” for advisory firms to detail charging structures on their website if they have one, its rules do not specifically require such upfront disclosure.

The clarification comes in response to comments from advisers following FTAdviser’s report on research showing that only five of the 50 largest advice firms in the country disclose fees on their websites.

Of the firms reviewed - based on FTAdviser sister title Financial Adviser’s Top 100 Advisers survey last year - and excluding networks, only Brewin Dolphin, Hargreaves Lansdown, Investec Wealth and Investment, Sanderson House and Vestra Wealth detail their charges online.

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In comments below the story one adviser said he had been told “categorically” that the FCA demands charges to be detailed, a contention that was disputed by others.

Speaking to FTAdviser the regulator stated that it was best practice but not mandatory, adding that advisers must disclose to clients their adviser charging structure in good time before making a personal recommendation or related services.

In practice this is generally done when the client first meets the adviser, or is sent to them in advance of the first meeting, a spokesperson said.

“We also require firms to provide the adviser charge relevant to the individual client as soon as practical,” read a statement, adding that obviously they will need to know about the client’s circumstances and objectives first, so this would be after the first fact finding meeting.

Speaking to FTAdviser, some smaller advisers also questioned the helpfulness of putting pricing online, as there are so many variables with charging structures for different clients.

Greg Heath, managing director at Derbyshire Booth Financial Management, said he found publishing fees counter-productive and that new client numbers actually went down.

“The ‘our fees’ tab was removed from the website and our new clients increased. I still send out our ‘client agreements’ and ‘cost of our services’ with the confirmation of appointment letter - so our costs are still highlighted in advance of the first meeting.

“However by this point they have made contact, normally spoken to a member of staff here, understand we run the first client meeting at our expense and we have broken the ice.”

However, Provisio Chartered Financial Planners director Andrew Whiteley stated that he has always believed that fees should be disclosed clearly either on advisers’ websites or within the firm’s service proposition.

“In my view any firm that does not clearly disclose their fees in this way does this for one reason: to enable them to charge higher fees to those that don’t object to them.

“I simply don’t believe the argument trotted out that, ‘I don’t know what I will have to charge until I see the client’. We stipulate a minimum fee of £720 for any client and in our service proposition we outline what’s included for clients, along with typical fees for projects other than straightforward wealth management.”