Online investment and advice firms, often called robo-advice firms, are failing customers with misleading costs and charges, blurring the distinction between advice and guidance and by using language customers do not understand, the Financial Services Consumer Panel has found.
Only one out of 15 consumers who attempted to use the websites during the research conducted by Boring Money on behalf of the FSCP was able to calculate correctly what the total cost of a £1,000 investment would be, with additional charges often found in smaller fonts or hidden in charts.
In its report, the FSCP said: “These findings indicate that, despite rules already being in place to protect consumers, there are serious shortcomings in the online investment sector that need to be addressed if consumers are to get good outcomes. Poor practice relating to transparency, clarity and consistency mean some firms are not treating their customers fairly and are failing to meet their needs.”
The panel has called on the FCA to clarify the rules for the online investment market and create a working group to develop more consumer-friendly language in the sector as more people, often using cash gained through pension freedoms, turn to online sites for help.
Sue Lewis, consumer panel chairman, said the issue was of growing importance.
“They need to know exactly what they are buying, what it costs, and what happens if something goes wrong. Most online firms are not giving them this information clearly, most of the time,” she said.
