Monday, 29 May, 2017

Almost half of advisers breaching disclosure rules: FCA

Larger, restricted advisory firms are more consistent on suitability - FCA Nearly half of advisers breaching disclosure rules: FCA
Laurie Berry | 19 May, 2017, 14:29

In its latest suitability review, the Financial Conduct Authority (FCA) said it was pleased to find advice given by regulated financial advisers was suitable in 93.1% of the cases but found slight variances depending on the types of firms.

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. In 4.3% of cases, unsuitable advice was provided, and a further 2.5% of advice was "unclear". Similarly, advice given by ARs was suitable 97.2% of the time, while directly authorised advisers gave the correct advice in 91.4% of cases. It said in 41.7% of cases disclosure was unacceptable.

A further 5.4% of cases provided "uncertain disclosure".

The FCA found the main area demonstrating unacceptable disclosure was in the initial disclosure, namely firms disclosing an hourly charging structure but not providing an approximation of how long each service was likely to take, and firms showing wide-ranging charging structures.

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

Larger firms with 25 or more advisers were more consistent, meeting the FCA's rules in 63.9% of cases.

Tony Gale: This is why Tottenham lost to West Ham
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"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".

'We expect firms to consider the results, particularly those areas where we flag continuing concern, and consider whether there are any areas where they can improve, ' the regulator added.

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".

With risk profiling some firms were found not to be considering or mitigating the limitations of the risk profiling tool they used, the FCA said.

A spokeswoman from the FCA said this meant any situation where a client transferred out of a situation with a known outcome, which included defined benefit pension transfers, as well as guaranteed annuity rates and other investments with a guaranteed return.

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