The Financial Conduct Authority (FCA) has contacted advisers for more information on their ongoing charges after a review raised concerns about how such charges are disclosed to clients.
The Assessing Suitability review, published in May, found that 40% of IFAs fell short of the regulator's expectations on disclosure. The review looked at around 650 advice firms.
The FCA has now written to 45 firms to understand the nature of their ongoing charging models, New Model Adviser® understands. The work will form part of its general supervision of the sector and will be used to determine whether further action is required.
New Model Adviser® reported ahead of the publication of the review in May that the FCA had deemed a firm's hourly charging structure 'unacceptable'. Although the client agreement confirmed that the firm charged hourly rates, it gave no example of the type of service and rate charged by partners, consultants, paraplanners or administrators.
The regulator was particularly critical of the presentation of hourly rates in its final report.
Consultant and former FCA technical specialist Rory Percival said the letters about charges are also connected to the regulator's asset management and platform market studies.
‘The FCA are taking the market study into platforms and the role of advisers alongside platforms in the value chain, so it could be information gathering about how that works,' he said.
'Alternatively, the regulator said previously, and in the interim asset management market study report, that it would be looking at adviser charges, so it could be some initial scoping in relation to this.’
In the terms of reference paper for its platform study, published in July, the FCA said advice charges would form part of the study.