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Welcome to our blog, the place we get things off our chest. It's a mix of rants and raves, often about fees and the cost of financial advice, along with anything else we think you might find useful.

Advisers failing to clearly disclose costs

By Justin Modray, published 18 May 2017.

The FCA has just published its findings after reviewing suitability reports (i.e. an adviser’s written report detailing and explaining their advice) from 656 advice firms.

It says that advice was suitable in 93.1% of cases. This sounds like good news, albeit it suggests there’s still about a 1 in 16 chance of receiving unsuitable advice. But suitable advice does not necessarily equate to what you or I might call good advice. For example, recommending a very expensive platform coupled with expensive funds of funds could be deemed suitable, even though it looks like poor advice from where I’m sitting.

Perhaps more interesting is that the FCA found cost disclosure was acceptable in only 52.7% of cases. This means it wasn’t up to scratch in nearly half of the reports reviewed.

This doesn’t surprise me, given my long-held view that financial advisers generally charge too much and pay inadequate attention to overall cost. Let’s face it, offending advisers are unlikely to shout about their steep fees from the rooftops – there’s a greater temptation to try and sweep them under the carpet. But they should be clearly disclosing them in their suitability reports, along with those of the products they recommend.

We always show all costs in our reports, in both percentage terms and pounds and pence, using a very clearly laid out table with supporting explanations. It’s simple to do and our clients find it very helpful when establishing how much they’ll pay and to whom.

What does surprise me is that based on these findings almost half of the customers covered by the FCA review appear to have taken advice without properly understanding how much it will cost them – never a good idea.