The Financial Conduct Authority has said it is "disappointed" with the findings of its advice consolidation review, which found none of the firms involved were able to demonstrate clients needs were suitably considered on a consistent basis.
While there were some examples of good practice, the FCA said firms tended to focus on the commercial benefits of consolidation and did not focus on the impact on the client.
Where firms had attempted to mitigate the disadvantages to the client of consolidation, these attempts were found by the regulator to not be consistent meaning some clients did not have their needs "appropriately considered".
Over the course of last year the FCA reviewed the practices of six firms which had recently acquired clients through the purchase of another legal entity or a client bank.
It is understood the consolidators involved in the review included Succession, AFH, Attivo and Bellpenny.
Among the issues the FCA found were details of the services offered by the new firm and the level of charges were not provided to clients at the start of the new relationship.
Differences between the service offered by the new firm and what was provided by the previous firm were also found not to be clearly explained and where historic advice responsibility was not taken over by the new firm, the regulator discovered clients were not told about this.
Addressing these findings, the FCA stated: "Whenever there is a change to a firm providing services, or a change to the services themselves, firms are reminded they must act in the client’s best interests and provide information to the client which is fair, clear and not misleading."
The FCA said it provided feedback to all the firms involved and all of the organisations involved in the review have now taken steps to improve their practices.
But the City watchdog warned other companies, which had not taken part in the review, that they should also now assess their practices.
The FCA said its review did not find any "widespread common themes of unsuitability".
Providers also came in for criticism from the report, with the FCA finding instances where it was not clear how a retail investment provider or platform service provider could have obtained or validated a client's instructions when the acquiring advice firm had not established the client’s agreement to the adviser charge.
The FCA's rules require retail investment providers and platform service providers to obtain and validate instructions from a retail client in relation to an adviser charge they offer to facilitate.
The FCA also found that firms did not always recognise where the contract between the original firm and the client did not allow ongoing services to be provided and charges to be transferred to the acquiring firm.
During its review the FCA discovered firms had acquired client banks in circumstances where the original client agreement to provide and charge for ongoing services was no longer valid for any services offered by the new firm.