Complex pricing structures make it hard for consumers to effectively shop around, according to the Financial Conduct Authority.
The FCA has published its assessment of good and poor practice relating to the price and value outcome of consumer duty.
This identified complex pricing structures at some firms, which the FCA said could be a deliberate practice.
It said: "Opaque pricing practices can obfuscate information for consumers so that they may not understand how high the charges are or be able to effectively shop around."
The update also identified investment platforms and self-invested personal pension operators charged a platform fee on cash holdings as well as retaining some of the interest earned on customers’ cash balances, known as ‘double dipping’.
It suggested firms could consider adjusting the core features of a product and ensure alternatives were available in cases like this.
The regulator had concerns about the extra complexity of the practice and a lack of transparency in the disclosures given to customers.
It set out that smaller firms may find it more challenging to analyse and identify interactions between outcomes of the consumer duty when looking at fair value concerns.
For example, they may not have the resources for extra customer analysis to test understanding and support concerns.
The FCA said: "We are working with firms to ensure they are taking an appropriate and proportionate approach to the price and value outcome.
"However, we will act where we see firms not making improvements in response to feedback, or if firms’ products and services are clear poor value outliers when compared to the price and value of similar products and services."
On the subject of fees and charges the regulator highlighted a firm which concluded customers received fair value across the value chain on the basis that all charges are disclosed and agreed between the adviser and the customer.
However it found poor practice in this area as the firm did not demonstrate the analysis necessary to conclude that these charges represented fair value.
Good practice in this area includes an investment platform which used illustrative examples of different groups of customers to demonstrate the effective cost to them, showing how much interest is retained and how much is paid by the customer.
The regulator concluded firms, with their fair value assessments, should demonstrate a "clear identification and understanding of the target market of products".
It should also be able to set out the total price to be paid as well as limitations of products.
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
