Compliance – Disclosure issues in DB transfer advice
6 January 2019
One of the FCA’s primary areas of focus continues to be DB Transfer advice and in December 2018, the FCA published its latest findings on the poor quality of much of the transfer advice provided to clients [read it here.]
What most readers could well have missed was the fleeting mention of disclosure issues that were also found in the transfer cases reviewed. The FCA found:
• only 29.2% of firms’ disclosure was compliant;
• 9.1% was unclear;
• a whopping 61.7% was non-compliant!
The disclosure failings were driven in part by failings in firms’ standard documentation, particularly in the way firms present initial and ongoing fees.
Even allowing for the fact that these findings arose from a targeted selection of firms, the results are entirely consistent with what we often find when we review firms’ disclosure processes and documentation.
Some six years after RDR changed how firms must charge for advice and how services and costs must be disclosed, we still regularly find firms with fee structures and disclosure documentation that are not compliant.
Common fee issues
Common disclosure issues
Whatever the charge, it must be clear to the consumer. You must disclose your charging structure to a client upfront and in writing, so they have the information in good time before the advice process starts. You must also agree and disclose the total charges your client will pay as soon as you know this.
You can only take an ongoing charge if you are providing an ongoing service – for example regularly reviewing the performance of a client’s investments – or for regular payment products.
If there is an ongoing charge for an ongoing service, you must confirm the details of the service, its charges and how your client can cancel the service.
Firms should review their fees and disclosure against the following tests. If the answer to any question is ‘No’ then your fees/disclosure may not be compliant.
Suggested action for adviser firms is to review their fee scale – does it pass the tests above? And also, to review their disclosure documentation, does it reflect the MiFID II independence definition and changes required by GDPR and IDD?
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