The Financial Conduct Authority has said it is working on guidelines for the preparation of suitability reports to make them more accessible to consumers.
The regulator has published a feedback statement on consumer communication as part of its bid to help consumers make informed decisions.
One of the issues raised was that consumer understanding of the nature of advice and the charges for it is limited.
The feedback statement said: “We acknowledge that many firms spend significant time on producing suitability reports.
“The existing FCA rules on suitability are not prescriptive and give firms flexibility in designing their suitability reports to meet regulatory requirements.
“Suitability reports was also an area of focus on the Financial Advice Market Review.
“We will work with the Association of Profession Financial Advisers, the Personal Finance Society and the Financial Ombudsman Service to help the industry develop guidelines for preparation of suitability reports to make them more accessible for consumers and reduce the time firms spend preparing them.
“This includes, for example, layering information so the most important material is included towards the start of the report and simplifying the language used.”
The FCA’s consultation into consumer communication also found that understanding of advice labels was “poor” among the public.
It had suggested the use of a standardised “label” which advisers would use to explain their services and costs but this wasn’t met with a positive reaction.
The FCA said: “While respondents supported the concept of standardised advice disclosure in principle – as this creates a level playing field for firms – they were critical of the advice labels suggested in the discussion paper.
“Respondents highlighted that the information included in the example labels, as shown in the discussion paper, was no different to what many firms now provide in their disclosure materials and did not bring further clarity to consumers.”
The FCA said the Financial Advice Working Group, set up after the publication of the FAMR report, was planning to publish a shortlist of potential new terms to describe guidance and advice by the end of 2016.
In a policy statement, also published today, the FCA has agreed to scrap its templates for certain documents - the initial disclosure document, combined initial disclosure document and the services and costs disclosure document - so firms could design their communications around the needs of their customers.
This will take effect from 1 February 2017.
Darren Cooke, financial planner at Derbyshire-based Red Circle Financial Planning, said: "On the whole reports that are shorter and easier for the client to read and understand would be a positive move.
"Currently reports can easily run to 20 pages or more with firms and compliance departments seeking to cover every possible angle so that they can defend any possible complaint years down the line.
"It is particularly welcome that in this consultation the FCA are involving not just the professional bodies but also the FOS. It is generally a fear of their rulings that drives firms to put so much detail into the reports now.
"If this also saves time in preparing reports and thus costs to firms that will be an added benefit."
