The FCA said in a statement that firms reviewed showed good practice in the work they did to better understand the quality of the products and services they recommended.
However, many firms did not consistently show that level of research across all products and services.
“Research and due diligence is one of the three pillars of getting advice right, which is why we have returned to this issue,” FCA director of life insurance and financial advice, Linda Woodall, said.
“Firms clearly want to get this right and all firms, regardless of size or type, can carry out good research and due diligence.
“However, there are still improvements firms need to make and we’d encourage all firms to look at our findings and ensure that they are challenging themselves to ensure they’re delivering quality due diligence for their clients.”
The FCA noted that the firms that did their research and due diligence properly had a good “culture of challenge”.
“Staff need to feel able to question the firm’s approach and there should be processes in place to allow for this,” the FCA said.
“In firms where this culture is weak, there could be a bias towards the status quo, with firms not questioning why they continued to recommend certain products and services.”
Further, the FCA said firms need to ensure they are adequately managing conflicts between clients and their own interests.
“For example, in some cases, the review found the service that the firms received from a platform was considered more important than the service received by the client,” the FCA said.
“In addition, some firms were no longer reviewing platform options available for clients because the firms were content with the service they received from their existing platform provider.”
To facilitate this research in Australia we need far more transparency from the industry funds. There is insufficient regulation and agreed standard practises in reporting performance which inhibits comparisons and facilitates data mining to maximise reported earnings.