The Financial Conduct Authority has said it will be targeting smaller IFAs to get them to up their game on disclosure.
Its suitability review, published yesterday (17 May), found the largest firms, and those which are restricted and network members, were more likely to provide suitable advice and to do acceptable disclosure.
The results found 97 per cent of restricted firms were providing suitable advice while 90.8 per cent of independent firms were doing so.
Meanwhile 69 per cent of network members were offering acceptable disclosure while this was the case with only 46 per cent of directly authorised firms.
Linda Woodall, director of financial advice at the FCA, said there would be a focus on smaller independent firms.
She said: “We will do that through our tried and trusted routes. We have already fed back to individual firms but we have our live and local events and our regulatory round up and other means of communicating with that sector and we will use those.
“We recognise that it is hard for a small firm without a compliance department to get fully up to speed with the regulatory requirements and what they might look like in practice but that’s where we have and will continue with our very comprehensive communication arrangements.”
Ms Woodall added that the regulator does not have preference for one advice business model over another.
She said: “So long as they describe themselves accurately so the client can understand what they are dealing with that is all we seek to ensure.”
Ms Woodall said the regulator came across no instances of independent firms describing themselves as such but not meeting the standards of operating under that description during its suitability review.
When it came to firm size, the FCA also found bigger firms tended to do better when it came to giving suitable advice and explaining how much they charge.
On suitability, firms with between one and two advisers had 91.8 per cent suitable advice compared to 96.2 per cent for firms with 25 advisers or more.
But mid-sized firms – with between three and 24 advisers – did worst, with only 89.3 per cent delivering suitable advice.
This was echoed in disclosure, where firms with between one and two advisers had 42.2 per cent acceptable disclosure compared to 63.9 per cent for firms with 25 advisers or more.
Again, mid-sized firms did worse, with 41.8 per cent acceptable disclosure.