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Wealth Management firms still vulnerable over fees, says Bovill

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Wealth management firms are still leaving themselves vulnerable to regulatory action by failing to meet the FCA’s expectations on fee disclosure, according to financial services regulatory consultancy Bovill.

Bovill says that the findings of the FCA’s latest thematic review (published December 16) following the Retail Distribution Review (RDR) revealed that the Wealth Management industry is falling behind on fee disclosure.
 
The FCA says that where charging is based on a percentage of the funds invested, 36% of Wealth firms failed to provide a cash example to show how much a client can expect to pay for initial advice.  This compared to 15% across the financial advisory industry as a whole.   50% of Wealth firms failed to provide a cash example of ongoing advice charges, compared to 18% across the industry as a whole. 
 
Neil Walkling, Wealth Management and Banking Consultant at Bovill, says: “While the FCA was broadly positive about the impact of the RDR so far, it has singled out wealth managers for criticism over meeting standards of disclosure on fees.
 
“This is the third time that the FCA has investigated disclosure of advice costs since the RDR reforms came in two years ago. So firms have been adequately warned – and regulatory action taken against firms still not getting it right will reflect that fact.”
 
“Providing an actual cash example of a percentage based fee structure is straightforward to do; firms should double-check their tariff of charges and make any necessary changes straightaway. Similarly, the thematic review findings show that, while some advisers might consider the option of offering an hours-based charge a competitive advantage, if that charging structure doesn’t give clients an indication of likely costs in the manner expected by the FCA then it could turn out to be a liability.”
 

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