Today (February 28) the regulator revealed it has found all advisers it reviewed were aware of the Mifid II rules and their responsibilities to disclose all costs and charges to customers.
But the regulator found intermediaries in the sample interpreted the rules inconsistently, making like-for-like comparisons of costs and charges difficult.
Here are five things the FCA revealed it expects advisers to do to improve the way they explained how much they get paid.
1) Flag all the costs
Mifid II introduced a need for advisers to calculate and disclose 'transaction costs'.
These costs include those from buying and selling underlying assets in an investment product.
The FCA saw many examples of companies which distributed investment products disclosing their own transaction costs but not disclosing investment product transaction costs.
This meant the distributor's aggregated figures were wrong.
According to the FCA this mistake was widespread early in 2018 and, while there was some improvement as the year progressed, some businesses were still not disclosing these charges.
Some advisers told the FCA they were leaving out transaction and incidental costs and charges because they could not get the necessary data.
They explained that this was compliant as the rules allowed them to estimate the costs as zero.
But the FCA stated it does not consider this an appropriate interpretation of the rules.
In the absence of actual costs to use as a proxy, the FCA said the rules do allow firms to use reasonable estimates.
But the FCA said advisers should make "a reasonable and sufficiently accurate estimate of the total costs of the financial instrument".
Advisers were told by the FCA they should also review pre-sale assumptions based on post-sale experience and adjust where necessary.
2) Push the hyperlinks
Mifid II requires that advisers give customers itemised breakdowns of costs and charges at the customer's request.
However the FCA found these breakdowns were not always adequately signposted for investors.
The regulator said it expects an investment firm to take reasonable steps to minimise the effort required for a client to request an itemised breakdown.
The FCA flagged European regulators have suggested that best practice for disclosing costs and charges online would be to enable a client to get this information through hyperlinks.
3) Be careful if you claim you are cheap
A few businesses were found by the FCA to be prominently advertising low costs while disclosing higher aggregated costs in less visible parts of their website.
The City watchdog argued such a practice is unlikely to meet the requirements that marketing material be fair, clear and not misleading, and that information in marketing communications is consistent with that provided to clients in the course of providing services.
The FCA stated it told firms it found doing this to change their disclosures accordingly.
Some advisers were also found to marketing their costs and charges as lower than out-of-date industry averages.
The FCA stated it told these advisers to improve their marketing on the basis that such comparisons could be potentially misleading for consumers.
If advisers want to compare their own costs with competitors, the FCA stated they should consider if these costs are up-to-date and subject to the same disclosure rules.
4) Be consistent
The FCA found examples of firms being inconsistent in their cost disclosures depending on the stage of the customer journey.
Some firms' generic pre-sale disclosure figures differed significantly from their tailored point-of-sale disclosures.
This was found by the FCA to be particularly the case when they had left out investment product transaction costs from pre-sale disclosures.
The FCA flagged advisers must ensure information in marketing is consistent with any separate information they give customers.
The FCA also had concerns about methods used to illustrate the impact of percentage charges over the lifecycle of an investment.
The watchdog found sample investment amounts and timescales being used.
The regulator found that some firms using this method chose very large cash amounts and very short time periods.
While this practice may mirror some investment behaviour, the FCA stated firms should be using examples that reflect general customer experience rather than selecting numbers that are easy to calculate.
5) Cash is king
The disclosure rules aim to improve transparency by requiring firms to disclose costs and charges as cash amounts as well as the long-standing industry practice of quoting percentage figures.
In the first half of 2018 the FCA found several examples of firms failing to incorporate cash equivalents in their disclosures.
While the FCA found the situation improved in the second half of the year, some firms still do not consistently include charges as both cash amounts and percentages.
emma.hughes@ft.com
