FCA Thematic Review 14/6 – Supervising Retail Investment Firms (part 2)

The FCA has recently completed the second stage of its thematic review on how firms and advisors are implementing RDR requirements. TR 14/6 focuses on whether firms are complying with the disclosure requirements.

The report published in April 2014 states:

“The results for the second stage of our review show that a high proportion of firms are failing to give their clients the key information required under the RDR. We are concerned that the extent of these failing may lead to poor outcomes for consumers. It is important that firms take note of our findings and act promptly to ensure they are meeting our expectations and delivering good outcomes .”

1.   RDR Thematic Review

The FCA found that a high proportion of firms are failing to correctly disclose to clients the cost of their advice, the type of service they offer (i.e. independent or restricted), and the nature of the ongoing service they provide.

“In our view, the level of non-compliance we identified and the failure of firms to meet their regulatory requirements is unacceptable.”

2.  Findings

  • 73% of firms failed to provide the correct information about the cost of advice.
  • 58% of firms failed to give clients clear upfront generic information on how much their advice might cost.
  • 50% of firms failed to give clients clear confirmation of how much the advice would cost them specifically as individuals.
  • 58% of firms failed to meet other important requirements in relation to the disclosure of their charges.
  • 31% of firms offering a ‘restricted’ service were not being clear they were restricted, or the nature of the restriction.
  • 34% of firms failed to give clients a clear explanation of the service they offer in return for an ongoing fee and/or their right to cancel this service.

3.  Guides for firms

A copy of the report can be found at http://www.fca.org.uk/your-fca/documents/thematic-reviews/tr14-06

Should you require any advice or information on RDR requirements, Cleveland & Co, your external in-house counsel, are here to help.

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