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Thousands of financial advice firms were warned yesterday that they face potential fines or bans after the City watchdog found three-quarters were failing to keep their clients properly informed about charges.
The Financial Conduct Authority (FCA) said that if they failed to clean up their act by later this year it would consider referring them for enforcement action.
It was already likely to refer two companies after “egregious failings” uncovered by its latest review.
FCA director of supervision Clive Adamson said: “I am disappointed with the results of our latest review looking at whether advisers are clear with their customers on costs and services provided.
“These results are a wake-up call and we expect the industry to respond.”
This was the second of three planned reviews checking on how advisers were selling investments following the introduction of stricter rules last year.
The FCA said its review found 73 per cent of firms were failing to provide the required information on the cost of advice.
The regulator also said most firms were not giving clients “clear upfront generic information on how much their advice might cost” or additional information on ongoing charges that might fluctuate.
It said failings were widespread across the industry, with wealth managers and private banks performing more poorly than other firms in nearly all aspects.
The third review will begin in later this year and firms still falling short of disclosure rules were warned they could face punishment, including “referrals to enforcement.”
The FCA has the power to levy unlimited fines and industry bans.