45 per cent either fail or unclear on FCA disclosure rules
The FCA has released the results of its long-awaited review of advice suitability, with the vast majority of advisers coming out with a clean bill of health on suitability but failing to disclose charges in line with the regulator’s rules.
The regulator first launched a review of more than 1,000 individual pieces of advice last April. 656 firms were tested against the FCA’s suitability and disclosure rules.
93.1 per cent of the cases showed suitable advice, the FCA said today. 4.3 per cent were unsuitable and a further 2.5 per cent were unclear.
The FCA said that the findings would help it communicate good and bad practice and focus its resources on firms and areas that pose the greatest consumer risk, but it did not say it had decided to take enforcement action against firms that failed.
The FCA said: “We consider that these are positive results for the sector. We believe they are a result of the successful adoption of the RDR by advisers and reinforced by our previous supervisory and enforcement activities.”
However, 41.7 per cent of advice breached disclosure rules and was described as uncertain in 5.4 per cent of cases.
Initial disclosure of costs and services was the main stumbling block for firms.
The FCA said: “The overwhelming issues were: firms disclosing charging structures with wide ranges; and firms using hourly charging rates failing to provide an indication of the number of hours for the provision of each service, rather than firms failing to provide any cost information. The disclosure results demonstrate there is further work required in this area. ”
Over the rest of the year and 2018 the FCA will embark on a communication campaign to deliver good and bad practice on suitability and disclosure, and will conduct a similar review in 2019 to see how advisers have reacted to upcoming Mifid and Priips regulations.