The Financial Conduct Authority (FCA) says firms are mostly adapting well to changes introduced following the Retail Distribution Review (RDR), but it has uncovered some problems, including firms describing themselves as independent but in fact choosing products from a limited number of providers or products.
The findings come in an early review of how advisory firms have implemented some of the core aspects of the RDR, which was introduced on 31 December last year.
Based on a sample of 50 firms, it found that most had made progress and it said it had identified a willingness among them to adapt to the new rules.
However, as well as finding some firms incorrectly describing themselves as independent, it said it was also concerned by some advisers providing charges in percentages, rather than cash terms, which some consumers found confusing.
It also said some firms were not clearly explaining what service customers will receive for ongoing fees.
On the issue of independence, the regulator said it had visited a few firms which, though describing themselves as IFAs, were either placing "almost all" business with one platform, or had a pre-determined list of products or investments.
The FCA has previously stated that it is possible, though unlikely, for firms to use a single platform for all clients and still refer to themselves as independent.
The review is the first of three planned over the next year to assess what progress advisory firms are making to meet the new RDR rules.
Clive Adamson, director of supervision at the FCA, said: "RDR was a major policy development, so it's right that we are acting on behalf of customers to see whether the significant changes are working for them.
"This early view shows that, while firms have acted, they still have more to do to if a customer is going to be in the best possible position to understand the price they will pay and the service they will get for that price.
"Firms should carefully consider the feedback covered in this report."
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