The regulator reviewed seven firms offering automated online discretionary investment management (ODIM).
A second review looked at three firms providing retail investment advice exclusively through automated channels, where customers do not interact with human financial advisers.
The research found service and fee-related disclosures at most ODIM firms in the sample were “unclear, some firms did not make clear whether their service was advised, non-advised, discretionary or non-discretionary.”
Some firms also compared their fee levels against peer services in a “potentially misleading” way.
The report added: “Many firms offering ODIM services did not properly evaluate a client’s knowledge and experience, investment objectives and capacity for loss in their suitability assessments.
“Some firms did not ask clients about their knowledge and experience at all, as they felt their service was suitable for all individuals regardless of their investment knowledge and experience.”
FCA rules require firms that provide and intend to provide automated investment services to give, “appropriate information about their services, costs and associated charges in a clear way.”
Referring to vulnerable customers, the FCA findings read: “In firms providing auto advice services there were weaknesses in identifying and supporting vulnerable consumers, with some offerings relying on the client to self-identify as vulnerable.
“Some firms had training material about vulnerability.
“However, firms should consider whether they could better identify vulnerable clients based on information captured from the automated advice offering and then provide appropriate follow up support.”
Overall the report found: “There appeared to be little consideration of auto advice-specific risks in firms’ governance processes.”
The FCA says that, following feedback, many firms had made “significant changes” to their disclosures and suitability processes.
It said it encouraged the technology but cautioned that it remained at “an early stage.”
The regulator vowed to offer support to help firms get robo-advice right, but also warned: “Where we see poor practices that could cause harm to consumers we will take action using appropriate regulatory tools, including early intervention or enforcement investigation where needed.”