The regulator has found larger, restricted and firms tied to networks to be more consistent in providing suitable advice than their smaller, independent and directly authorised counterparts.
In its latest suitability review the Financial Conduct Authority (FCA) said it was pleased to find advice given by regulated financial advisers was suitable in 93.1% of the cases but found slight variances in the types of firms it regulates.
The regulator had assessed 1,142 individual pieces of advice given by 656 firms against its suitability and disclosure rules.
It found restricted advisers were more likely to give suitable advice than their independent counterparts, while appointed representatives (AR) of networks also fared better than advisers who were directly authorised.
According to the FCA's data, restricted firms provided suitable advice 97% of the time versus IFAs, who pleased the regulator in 90.8% of cases. Similarly, advice given by ARs was suitable 97.2% of the time, while directly authorised advisers gave the correct advice in 91.4% of cases.
Larger firms were also found to be more consistent. Those with 25 or more advisers in the firm provided suitable advice 96.2% of the time, compared with 89.3% for firms with 3-24 advisers and a considerable 91.8% for firms with one or two advisers.
Although the regulator found some suitability reports were too long and complex in many cases, it said the overall results were "positive for the sector".
Admitting there was "limited scope for improvement", the FCA said it would focus on the root causes for failed suitability - risk profiling and replacement business - instead of exploring why different types of firms had fared differently in its assessment.
By providing suitable advice 93.1% of the time, advisers fared a lot better in suitability than in disclosure, where the FCA found the sector failed to meet requirements almost 50% of the time.
The FCA said: "We consider that there is limited scope for improvement by focusing our supervisory resource on the areas identified as showing statistically significant differences. Instead, we intend to focus on the root causes identified across all file types, namely risk profiling and replacement business.
"We will also use our supervisory resources to focus further on those areas where there might be a small number of firms that are giving rise to a high level of consumer detriment."
The FCA added: "Our review also identified several examples of firms demonstrating good practice and going beyond compliance with our rules. This was evident across all three advice areas, including where firms gave retirement income advice and were having to deal with the significant change that came into effect in April 2015."
Root causes for failed suitability
With risk profiling some firms were found not to be considering or mitigating the limitations of the risk profiling tool they used, the FCA said.
With replacement business some firms were recommending that customers give up valuable guarantees without good reason or the additional costs appeared to outweigh the benefits of the recommended solution, it added.
The regulator said it would target firms providing unsuitable advice about complex products, in a piece of work announced in its latest business plan.
It would also feedback further detail on examples of good practice throughout its communications plan.
The regulator intends to repeat its review in 2019 based upon advice delivered in 2018, which will be measured against the previous results.
Joining London team
Previously at Old Mutual Wealth
Will introduce a cap on cost of care
Inertia has become a key policy mechanism