The watchdog warned it would take further action on disclosure relating to retail products “unless things improve.”
The FCA today published the key findings of its supervisory work to assess the “effectiveness” of disclosure by asset managers and intermediaries, such as wealth managers, to their retail customers.
The work was prompted by new disclosure requirements on costs and charges introduced by MiFID II and PRIIPs which came into effect in January 2018.
Andrew Bailey, chief executive of the FCA, said the review found firms were “inconsistent” in their approach to the information they are required to give to clients. This could risk poor consumer outcomes he said.
He said: “MiFID II and PRIIPs brought enormous change to how firms operate and the information they are required to give their customers. While awareness of the rules appears good, we found that firms take inconsistent approaches, risking confusion for customers, who may be misled about how much they are being charged.
“Certain aspects surrounding compliance with PRIIPs may risk not leading to good consumer outcomes and we are working with EU institutions to address these. We are aware that many firms are finding aspects of the calculations difficult or are making inaccurate calculations. We will work with firms to help them ensure their reporting is accurate.
“We are aware of public claims of an intent deliberately not to comply with the new rules. While we have found some areas of non-compliance with the new rules the claims which have been made regarding this are not supported by the evidence in important respects.”
The main findings from the review include:
• The FCA found that most asset managers calculate transaction costs according to the rules and there was a good level of compliance with the documents firms are required to produce.
• There were problems with the way some asset managers calculate transaction costs and how prominently they disclose them.
• The FCA found that asset managers generally do not disclose all associated costs and charges and, where full disclosures are made, inconsistencies between documents and website mean consumers can find the information difficult to understand.
• Asset managers should review their cost disclosures to ensure that they are clear, fair and not misleading.
The review focused on retail intermediaries, such as wealth managers, direct-to-consumer platforms and advisory firms who distribute products to end consumers.
The FCA said it found that all the firms under review were aware of the rules and their responsibilities to disclose all costs and charges to customers and the FCA saw examples of good practice that exceeded compliance with the relevant rules.
The FCA however also found that firms in the sample interpreted the rules inconsistently, making like-for-like comparisons of costs and charges difficult.
Some firms said they struggled to obtain all the data they need from other firms to enable disclosure of all costs. Firms involved in the design, manufacture and distribution of products need to work together to ensure all costs and charges were disclosed properly to customers, said the FCA.
The FCA’s Call for Input sought feedback on a number of issues, including the scope of PRIIPs (Packaged retail investment and insurance-based products) regulations, summary risk indicators and performance scenarios.
The FCA said shares the concerns of respondents and will continue to work closely with the European Commission and ESAs to influence the full review of PRIIPs regulation due in 2019.
The Call for Input also highlighted concerns that some Key Information Documents (KIDs) were displaying negative, zero or very high transaction costs that were unlikely to fairly represent the true transaction cost of the product.
• The FCA has also today published a consultation setting out proposed rules that require pension scheme governance bodies, such as Independent Governance Committees, to disclose costs and charges to scheme members so pension scheme members and workplace pension schemes are better able to hold schemes to account.