The Financial Conduct Authority has found 73% of firms are not being clear over the cost of advice, with one wealth firm likely to be referred to the regulator's Enforcement and Financial Crime division for 'egregious' failings.
In the second stage of a three-part series of thematic reviews the financial watchdog, which said it is also likely to refer an advisory firm to its Enforcement and Financial Crime division, found:
* 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 on how much advice would cost them as individuals;
* 58% of firms failed to give additional information on charges, for example not highlighting that on-going charges may fluctuate;
* 31% of firms offering a ‘restricted’ service (they cannot advise on the full range of financial products and providers available) 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.
The regulator said while failings were widespread across the industry, wealth managers and private banks 'performed poorer than other firms in nearly all aspects'.
The findings increases the pressure on the wealth industry, which is already the subject of an intense review into suitability.
Last week the FCA released its annual review in which it revealed it was launching an investigation into wealth firm's use of in-house funds to determine whether there were conflicts of interests at work.
'RDR has involved a major change to the investment advice landscape. While we have seen a lot of positive progress and willingness by advisors to adapt to the new environment, I am disappointed with the results of our latest review looking at whether advisors are clear with their customers on costs and services provided,' Clive Adamson (pictured), director of supervision at the FCA said.
'These results are a wake-up call and we expect the industry to respond.'
The FCA began its thematic review into advice following the implementation of the retail distribution review in February 2013.
In its first set of findings, published in July 2013, the regulator expressed concern over the way firms were disclosing adviser charging.
The FCA will publish its third and final cycle in the third quarter of this year.
As part of its review the FCA looked into how advisory firms describing themselves as independent were using the label. The results published in March showed most firms appeared to be using the label accurately.
Full details of the FCA's latest thematic paper on investment advice can be found here.