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Wealth Managers Still Falling Short On Fee Disclosure - Consultants, Regulator
Wealth management firms are still leaving themselves vulnerable to regulatory action by failing to meet the FCA’s expectations on fee disclosure, wealth manager Bovill has warned.
Wealth management firms are still leaving themselves vulnerable to regulatory action by failing to meet the FCA’s expectations on fee disclosure, wealth management consultancy Bovill has warned.
It comes after the FCA’s latest thematic review – published yesterday – which showed 36 per cent of wealth firms failed to provide a cash example to show how much a client can expect to pay for initial advice. This is compared to 15 per cent across the financial advisory industry as a whole. Meanwhile 50 per cent of wealth firms failed to provide a cash example of ongoing advice charges, compared to 18 per cent across the industry as a whole.
The statistics suggest that while some parts of the industry have improved transparency since the advent of the Retail Distribution Review programme of regulatory reforms in 2013, there is still a great deal of improvement left to be made.
“While the FCA was broadly positive about the impact of the RDR so far, it has singled out wealth managers for criticism over meeting standards of disclosure on fees,” said Neil Walkling, wealth management and banking consultant at Bovill. “This is the third time that the FCA has investigated disclosure of advice costs since the RDR reforms came in two years ago. So firms have been adequately warned – and regulatory action taken against firms still not getting it right will reflect that fact.”
“Providing an actual cash example of a percentage-based fee structure is straightforward to do; firms should double-check their tariff of charges and make any necessary changes straightaway. Similarly, the thematic review findings show that, while some advisors might consider the option of offering an hours-based charge a competitive advantage, if that charging structure doesn’t give clients an indication of likely costs in the manner expected by the FCA then it could turn out to be a liability,” Walkling added.