The FCA has published a report setting out its findings from a review into the pensions and investment advice market. The review was initiated in April 2016 in recognition of the important role the FCA plays in supporting the sector in delivering suitable advice.
The FCA’s review has provided positive results. In assessing 1,142 individual pieces of advice given by 656 firms against the suitability and disclosure rules in the Conduct of Business sourcebook it found that:
- in 93.1% of cases, the sector provides suitable advice;
- in 4.3% of cases, the sector provides unsuitable advice; and
- in 2.5% of cases, the sector provides unclear advice.
In terms of disclosure the FCA found that:
- in 52.9% of cases, the sector provides acceptable disclosure;
- in 41.7% of cases, the sector provides unacceptable disclosure; and
- in 5.4% of cases, the sector provides uncertain disclosure.
The FCA’s assessment of disclosure considered three distinct elements: the firm’s initial disclosure, the product disclosure and the disclosure in the suitability report. The FCA found 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 FCA also found that whilst firms’ disclosure of product charges and disclosure in suitability reports were meeting its rules, some suitability reports were too long and/or complex.
View Assessing Suitability Review, 18 May 2017