Many fund houses and wealth managers are ignoring the spirit, if not the letter of the law, when it comes to disclosing all of the fees charged to clients as required under the Mifid II rules, according to research by Alan Miller, founder of wealth manager SCM Private.
Mr Miller compiled the anonymised data which, he said, showed only 40 per cent of investment firms disclose all of the charges they are required to disclose on their websites.
The remainder either only make the data available via a third party data provider, or require an email from the client.
None of the robo advisers or online wealth managers he looked at displayed the charges on their website prior to an account being opened, he said.
In terms of direct to consumer investment platforms, such Nutmeg, 30 per cent showed the full costs on their website prior to an account being opened.
Mr Miller said: “Ninety per cent of the sample had no estimate of the overall transaction costs either associated with dealing in and/or within the funds invested, in their website summary of overall charges.
"Several websites claimed there were no transaction costs associated with their services.”
Where fees were shown, Mr Miller said they were often misleading.
“Many firms showed the cost of a sample fund selected in prominent pages of their website as being 1.06 per cent plus performance fee, even though the total Mifid II fund cost including performance fees and transaction costs amounted to 3.38 per cent.”
The final segment of the market he looked at was traditional wealth managers.
Only 22 per cent showed all the aggregated costs and charges, including the full transaction costs inside the funds in which they invested, prior to an account being opened/invested, according to Mr Miller.
Only 14 per cent revealed all their costs including the full transaction costs, within an illustration showing the cumulative impact of costs and returns as required by MiFID II.
But the veteran fund manager pointed to a lack of direction from the regulator as being a further hindrance to greater transparency of costs and charges.
“The Financial Conduct Authority have failed to provide firms with any technical guidance of how to comply with full cost disclosure or provide a mandated template that would allow prospective retail clients to make genuine cost comparisons between investment products," he said.
He called on the FCA to crackdown on firms failing to meet the higher disclosure standards under Mifid II.
“UK investors should rightly expect to be protected, especially as the FCA could utilise its powers to fine firms for non-compliance, up to 10 per cent of their annual turnover or at least €5m (£4.4m), and at least twice the benefit derived.
"Furthermore, investors may be entitled to rescind their contracts and claim damages against firms."
Mr Miller put forward three measures he said "could radically resolve the issue of potentially illegal behaviour by firms almost overnight”.
First would see the FCA publicly state its intention to be immediately tough on firms and individuals not complying with the rules regarding costs and charges within MiFID II.