* FCA says three-quarters failing on charge advice
* To refer two firms to enforcement division
* More referrals may follow after 3rd of 3 reviews later in
(Adds more background on reform, consultant comment)
By Chris Vellacott
LONDON, April 7 Financial advisers in Britain
were given a "wake-up call" on Monday when the industry
regulator said three-quarters were failing to clearly tell
clients how much they were charging for investment advice.
The Financial Conduct Authority warned it was running out of
patience after the second of three health checks on how advisers
are selling investments to individuals following reforms
introduced at the start of 2013 including stricter rules on
transparency and disclosure.
It said it was likely to refer an advisory firm and a wealth
manager to its Enforcement and Financial Crime Division for
"egregious failings", without naming either, and warned more
referrals could follow at a third review later this year.
The regulator has the power to impose fines and revoke
licences to operate if it uncovers serious failings.
While wealth managers and private banks, serving richer
clients, were among the worst offenders, failings were
"widespread across the industry", it said in its statement.
"I am disappointed with the results of our latest review
looking at whether advisers are clear with their customers on
costs and services provided," said Clive Adamson, director of
supervision at the FCA.
"These results are a wake-up call and we expect the industry
The FCA's reform of financial product-selling to private
investors, known as the Retail Distribution Review, has already
caused massive upheaval among advisers, many of whom have closed
down or sold up following a ban on commission-based sales.
The new rules force advisers to charge clients a fee, rather
than taking commissions if they make a sale, prompting concerns
customers will shun advice.
Andrew Power, a partner at consultants Deloitte, said the
latest FCA check could prompt more companies who were delaying
implementation of the rules for fear their clients would balk at
the new fees, to shut up shop.
"If it was a case of hiding (charges) and not being
completely transparent because I'm worried the client won't use
me, then those people might say it's uneconomic to carry on in
terms of the lack of client willingness to pay," he said.
Just last week, a number of UK wealth managers took steps to
shake up their business plan, and analysts said consolidation
was likely in the industry, which remains highly fragmented.
(Editing by Simon Jessop and Pravin Char)