The Financial Conduct Authority (FCA) has told advisers to pay closer attention to the total cost of the investment chain, warning clients were at risk of receiving poor value for money.
In its Business Plan for 2017/18 published on 18 April, the regulator said advisers "may give insufficient attention to the total cost of investment products and of advice", which it argued could result in poor value for money for their clients.
Speaking at the regulator's presentation of the plan, FCA director of strategy and competition Christopher Woolard (pictured) said the FCA had detected issues during its asset management study that looked at the value consumers receive through the whole retail investment value chain, including platform and advice costs.
He said: "What we have to look at there is, in terms of cost, what value is the consumer receiving - is that being thought about in the round, rather than being thought of in discrete chunks? Because we need to add up that total cost.
"That often means quite a large amount being paid for the vehicle to get that asset - and to have advice on that asset - versus the impact of the actual cost of owning that asset itself."
Rory Percival highlighted similar issues while he was at the regulator, and previously warned advisers on "self-defeating transcations" where clients would not see value for money in the investment chain.
The regulator also announced it would launch a review into the retail investment platform market. It said it wants to look into a number of competition issues within the market, as well as how platforms compete to win and retain customers and whether they pass on discounts.
No magic number for cost
The regulator also took aim at advisers' cost transparency in its sector review on retail investment published on Tuesday, saying it would keep the issue under review.
It said in the paper: "Relatively few advisers are transparent about their pricing before they sell advice. This does not incentivise advisers to compete on price and may result in limited pressure on them to reduce their charges."
Chief executive Andrew Bailey argued there was no "magic number" for the cost of advice, however. He said: "It's about customers being clear on what they're being charged for and what service they're receiving in relation to those charges.
"There isn't a magic number which is right or wrong, it's about the clarity and quality of the service you're getting in relation to what you're being charged."
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