AJ Bell has said the current regime for comparing pension charges is “not fit for purpose”, claiming the key documents currently used by providers should be abolished.
According to the 594 advisers questioned as part of a study looking at how pension and investment charges are compared, 61 per cent said the Key Features Illustrations fail to explain to clients the charges they will pay and the benefits they will receive.
Key Features Illustrations, or KFIs, are meant to help people compare charges between different products so that they can decide which one to purchase.
Platform provider AJ Bell said the findings suggest that KFIs either need a serious rethink or need to be abolished as part of the Financial Advice Market Review.
Billy Mackay, marketing director at AJ Bell, said these documents are now so complicated and difficult for clients to understand that their objectives have been lost.
He said KFIs, for example, often run to 10 pages or more of "impenetrable numbers".
In June 2015, the FCA acknowledged that consumers’ ability to make informed decisions is often impeded by documents failing to provide consumers with the information they need in an accessible and understandable format.
Part of this was due to consumers being overloaded with information and excessive use of financial and legal language that stops consumers from engaging with information.
AJ Bell said it was disappointing that the FAMR report, published in March this year, just focused on shortening the time spent on suitability reports, rather than un-picking all the pieces of information people receive during the sales process and working out what people really need to know.
Mr Mackay said the scope of the FAMR should be extended to ensure that KFIs are reviewed alongside suitability reports.
He said: “Any replacement of KFIs must involve a much simpler set of product features and costs outlined in a manner that the ordinary person in the street will have a fighting chance of understanding.
“FAMR should be an opportunity to improve access to financial advice in the UK and deliver better outcome to consumers.
“Unfortunately, as it currently stands the FAMR is a generic set of observations with very few clear actions that are going to help achieve those objectives.”
Tony Catt, compliance consultant at TC Compliance Services, said: "I think that the issue with key features illustrations is that the clients are fairly unlikely to read them and even less likely to understand them.
"They are typical documents produced to provide a blanket of information about a product, without any thought of how useful they are to clients."
He said all a client wants to know is what they are putting in, what they can expect to get back, and what benefit the plan is to them.
"Many advisers struggle to understand all the figures, so the client has little or no chance."