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FCA review finds majority of FA firms mislead customers
| Published: | 7 Apr at 6 PM |
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The UK Financial Conduct Agency’s latest review into financial advice firms found that failings are widespread across the sector.
The review concentrated on advice given by FAs to their clients, and found that 58 per cent of those questioned were not providing clear, upfront information as to their charges. A majority of 58 per cent failed to explain the full extent of charges and the fact that they may fluctuate over the duration of the investment.
Only half the advisory firms were specific about the cost of advice to individuals, and 31 per cent of FAs offering a restricted service did not explain the exact nature of the restrictions. In 34 per cent of financial advisory companies, services provided as part of an ongoing fee structure were not clearly explained, nor were the clients informed about their right to cancel the service.
Clive Adamson, FCA’s director of supervision, said he was disappointed with the review’s results, adding that the industry should regard them as a wake-up-call to which they must respond. Given the sector’s bad press over the last several years, it seems the FCA now accepts that customers are getting poor value for money as regards services and, often, the investments themselves.
Whilst the FCA’s review is a positive move, aimed at forcing the industry to modify a number of its practices, its brief does not extend to British FAs working, often illegally, in many expat destinations worldwide. Recruited from the UK and given little, if any, training, commission-hungry salesmen prey on investment novices, focusing on new arrivals.
Many of the unsuitable products mis-sold by unethical FAs in overseas locations are provided by offshore insurers linked to the UK by a web of holding companies. Questions are now being asked as to whether the FCA should consider the holding companies responsible for the mis-sold investments, as expats invariably have no other recourse when losses occur.
The review concentrated on advice given by FAs to their clients, and found that 58 per cent of those questioned were not providing clear, upfront information as to their charges. A majority of 58 per cent failed to explain the full extent of charges and the fact that they may fluctuate over the duration of the investment.
Only half the advisory firms were specific about the cost of advice to individuals, and 31 per cent of FAs offering a restricted service did not explain the exact nature of the restrictions. In 34 per cent of financial advisory companies, services provided as part of an ongoing fee structure were not clearly explained, nor were the clients informed about their right to cancel the service.
Clive Adamson, FCA’s director of supervision, said he was disappointed with the review’s results, adding that the industry should regard them as a wake-up-call to which they must respond. Given the sector’s bad press over the last several years, it seems the FCA now accepts that customers are getting poor value for money as regards services and, often, the investments themselves.
Whilst the FCA’s review is a positive move, aimed at forcing the industry to modify a number of its practices, its brief does not extend to British FAs working, often illegally, in many expat destinations worldwide. Recruited from the UK and given little, if any, training, commission-hungry salesmen prey on investment novices, focusing on new arrivals.
Many of the unsuitable products mis-sold by unethical FAs in overseas locations are provided by offshore insurers linked to the UK by a web of holding companies. Questions are now being asked as to whether the FCA should consider the holding companies responsible for the mis-sold investments, as expats invariably have no other recourse when losses occur.
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