Many online-based advisor services in the U.K. need to improve their disclosure to clients greatly, according to new research from U.K.-based investor advocacy group the Financial Services Consumer Panel (FSCP).
The FSCP reports that research it commissioned from Boring Money Ltd. found shortcomings in disclosure by online-based advisory firms, including robo-advisors, traditional direct to consumer firms and firms offering model portfolios with no advice.
Specifically, the shortcomings include inadequate cost disclosure; lack of communication about whether the firms were providing regulated advice; and lack of disclosure about clients’ options for recourse. It also found that consumers “did not understand the difference between regulated advice and guidance.”
As a result of these findings, the FSCP is calling on U.K. regulators to clarify and enforce existing disclosure requirements for online advisory firms and to form a working group to develop standardized, simple, consumer friendly, disclosure language.
“More and more people with relatively small amounts of money to invest are turning to online investment services [and] they need to know exactly what they are buying, what it costs, and what happens if something goes wrong,” says Sue Lewis, chairwoman of the FSCP, in a statement.
“Most online firms are not giving [investors] this information clearly, most of the time,” she adds. “It’s obvious these firms do not have a clue how to communicate in a way their customers understand. The FCA should enforce its rules in this area vigorously, whether firms are giving regulated advice or not, before more people who can ill afford it lose out.”