Additionally, the regulator said it had reviewed three firms providing investment advice through automated channels. These are services where clients do not interact with human advisers at all.
One of the major findings from the review was that the fee-related disclosures of most of the robo-advice firms it sampled were unclear.
“Some firms did not make clear whether their service was advised, non-advised, discretionary or non-discretionary,” the review said.
Several of the firms also compared their fee levels against peer services in a potentially misleading way, the regulator said.
“For example, they compared a non-advised, non-discretionary service with a discretionary service solely on a cost basis without explaining the difference in the nature of the service.”
The regulator also accused robo-advice firms of failing to collect enough information about customers, including their levels of debt and other outgoings and said “there were weaknesses in identifying and supporting vulnerable consumers”.
“Some firms did not ask clients about their knowledge and experience at all, as they felt their service was suitable for all individuals regardless of their investment knowledge and experience,” the regulator said.
Further, the FCA said firms offering advice through automated channels used a “streamlined” model to make a personal recommendation.
“Some services lacked adequate fact finding and ‘know your client’ focus, instead relying on assumptions about clients.
“In general, we were not satisfied with the strength of information gathering about clients’ financial circumstances,” the FCA said.
Significant changes made
In its concluding remarks, the FCA said many of the firms it sampled have now made “significant changes” to their disclosures and suitability processes.
They said they would continue to work with firms individually to develop further improvements where necessary.
“The market for both ODIM and auto advice services remains at an early stage, with a number of firms expected to launch services over the coming year.
“We continue to encourage innovation in automated investment services. While this is an evolving market, our rules on suitability of advice apply regardless of the medium through which the service is offered,” the regulator said.