The Financial Conduct Authority (FCA) has said it will look at transparency around exit charges from closed-book providers but advisers say the investigation shows the regulator is "behind the curve" on preventing consumer detriment.
The regulator's thematic review, released on 3 March, found problems in the way 11 closed book providers treated their customers.
In particular, it found cases in which closed-book firms failed to inform customers of exit and paid-up charges at the time they were incurred.
Abbey Life, Countrywide, Old Mutual, Police Mutual, Prudential and Scottish Widows now face enforcement investigations into behaviour on charges.
FCA acting chief executive Tracey McDermott said: "We have particular concerns regarding how some firms communicated with their customers about exit and/or paid-up charges. We are now doing further work to understand the reasons for these practices, whether customers may have suffered detriment and if so how widespread these issues are."
However Barrett's Financial Solutions managing director Kim Barrett said he believes the regulators energies are misfocused and that there are far bigger transparency issues than those of charges of closed-book providers.
He said: "The FCA is always behind the curve on what matters. The Retail Distribution Review has led to massive consumer detriment in some areas. The charges related to discretionary fund manager (DFMs) use is one. DFMs are used far more widely and yet the charges are enormous is some cases.
"And during the move from dirty to clean share classes many providers seemed to hike the price of underlying shares without declaring this. How was this transparent?
"Product providers and advisers are having it large at the expense of the general public but the FCA is never at the table for the big issues.
"Also, it seems unfair to have a pop at providers for practices established 25 years ago."
Freelance compliance officer Toni Catt agreed most of the charges are a thing of the past as they have already been paid.
He also suggested it would be difficult to work out some of the costs as they depend on the underlying investments.
He said: "Closed-book charges can make a big dent in client money, but it is the adviser's job to understand where the charges are being levied and do a cost benefit analysis.
"Yes it would be a lovely thing if these charges were addressed but most of them have already been paid."
He added: "The lack of transparency is often the result of the type of underlying investment. The charges related to with-profit funds depend on peaks and troughs in the stock market and so are by their nature difficult to work out."
Sedulo Wealth director Paul Lindfield said: "There are some transparency issues with the contracts set up by old school providers. But one way of resolving this would to be for them to publish the transfer value as well as the fund. This would help customers work out what the charges are."
"The best advice the FCA could give around this subject would be to tell customers to see a financial adviser if they are transferring from a closed book provider. This should be similar to the ‘safeguarding' guidance given to customers with pension pots of over £30k."
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