FCA rules out shaking up fee disclosure rules

It recently reviewed 1,142 individual pieces of advice given by 656 firms as part of the study and overall it found while the vast majority of firms were providing suitable advice there was room for improvement in disclosure – particularly on charges.

In some parts of the financial services industry the FCA requires firms to publish information about their services and its costs in templated documents.

But Linda Woodall, director of financial advice at the regulator, said she saw no reason to introduce this for financial advice.

She said: “To be honest we would have to have a reason and it would have to be backed up by strong evidence before we implemented some sort of new system.

“I think our messages are somewhat simpler than that: in the early stages, give your client an indication of what you might charge.

“It is difficult to be precise because you have not gone through the whole process but advisers should give an indication.”

As the sector’s confidence grows in better positioning the cost of its services, we’re confident that the expectations of the regulator and the public will be fully met.Keith Richards

While the FCA found most advisers provided suitable advice, it found greater issues with disclosure.

It found 52.9 per cent of firms were providing an acceptable level of disclosure, the regulator stated 41.7 per cent were “unacceptable” when it came to spelling out how much they charge and what services they provide.

The main issue was in the area of charging structures, with firms using hourly charging structures not providing an estimate of how long each service would take and firms using charging structures with a wide range.

Keith Richards, chief executive of the Personal Finance Society, said: “Advisers have clearly successfully adopted the changes resulting from the Retail Distribution Review and continue to provide consumers a valuable service that supports their long-term financial planning needs.

“It is important to note that the breaches identified by the FCA were not reflective of a failure to disclose charges at all, but rather represented discrepancies between charging disclosures and the quite stringent and detailed regulatory requirements.

“The sector has made great progress in recent years in terms of making complex fee structures transparent and clear to clients.

“As the sector’s confidence grows in better positioning the cost of its services, we’re confident that the expectations of the regulator and the public will be fully met.”

damian.fantato@ft.com