Financial advisers fail on disclosure almost half the time, particularly in their initial information on cost and services, the Financial Conduct Authority (FCA) has warned.
In its latest suitability review the regulator said it was "disappointed" to find the advice sector provided "unacceptable disclosure" in 41.7% and "uncertain disclosure" in 5.4% of the cases it had looked at.
This meant advisers met the FCA's disclosure requirements in a mere 52.9% of cases, the regulator said.
The FCA had assessed 1,142 cases in 656 firms. In particular, advisers failed to be clear with their clients on things such as cost and services, the FCA said.
Firms did not fail to provide cost information as such, instead they were disclosing charging structures with wide ranges, or using hourly charging rates and failing to provide an indication of the number of hours it would take to provide the service, the FCA said.
Small independent firms fared worst in the regulator's assessment. According to the FCA, one-man bands were complying with the regulator's disclosure rules in 42.2% of cases, while those with 3-24 advisers complied 41.8% of the time.
Larger firms with 25 or more advisers were more consistent, meeting the FCA's rules in 63.9% of cases.
Meanwhile, independent firms met the FCA's disclosure rules in 39.5% of cases, while restricted firms fared considerably better at 75%.
The FCA said: "The disclosure results demonstrate there is further work required in this area. We consider disclosure to be an important aspect of the advice process as it assists customers in making informed decisions about their financial affairs.
"We expect firms to consider the results, particularly those areas where we flag continuing concern, and consider whether there are any areas where they can improve."
The FCA said the report represented the beginning of a communication programme with advisers which would run throughout 2017 and into 2018.
It aims to share more detail on its findings and said it would offer examples of both good and bad practice.
For now it has given feedback to the 656 firms that participated in its review, offering insight into what it saw as the weaknesses in firms' advice processes, also highlighting areas of good practice.
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