The regulator criticised the sector in this area as part of a suitability of advice review, published today.
But it reported broadly positive findings after assessing 1,142 individual pieces of advice given by 656 firms, calling the results 'positive'.
The assessment of disclosure considered three distinct elements: the firm’s initial disclosure, the product disclosure and the disclosure in the suitability report.
The disclosure results were:
• in 52.9% of cases, the sector provides acceptable disclosure (i.e. FCA disclosure requirements have been complied with)
• in 41.7% of cases, the sector provides unacceptable disclosure (i.e. FCA disclosure rules have not been complied with)
• in 5.4% of cases, the sector provides uncertain disclosure
It found the following in terms of suitability:
• in 93.1% of cases, the sector provides suitable advice
• in 4.3% of cases, the sector provides unsuitable advice
• in 2.5% of cases, the sector provides unclear advice
On the area that requires improvement in the sector, the FCA report stated: “Our results show that the main area where there is a high level of unacceptable disclosure is with firms’ initial disclosure, which includes firms’ costs and services.
“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.
“We recognise firms’ disclosure of product charges and the disclosure in suitability reports was regularly meeting our rules; however, some suitability reports were too long and/or complex.
“We consider disclosure to be an important aspect of the advice process as it assists customers in making informed decisions about their financial affairs. 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 suitability of advice was highlighted as one of the seven priorities in the FCA 2016/17 Business Plan.
The FCA stated: “We consider that these are positive results for the sector. We believe they are a result of the successful adoption of the Retail Distribution Review by advisers and reinforced by our previous supervisory and enforcement activities.”
The FCA said it will be beginning a communication programme this year and into 2018, where it will share more detail on the findings, including examples of good and poor practice.
The review began in April 2016 with the purpose of assessing a statistically robust sample of advice files.
There was a dedicated email inbox and phone line, encouraging firms to use them where they had any queries. The phone line received over 1,000 calls from approximately 450 firms between April and September.