Two firms with "egregious failings" are likely to be referred to the FCA's Enforcement and Financial Crime Division after a review by the regulator.
An FCA study has shown that too many advisory firms are not yet clear enough with their customers on their charges and services.
The two firms with "egregious failings" include one financial advisory firm and one wealth management firm.
The regulator found too many advisory firms were not being clear with consumers on how much advice costs, the type of service they offer, whether it is restricted and the nature of the restriction and what ongoing services they provide.
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The Financial Conduct Authority's latest review into disclosure by financial advisers found that 73 per cent of firms failed to provide the required information on the cost of advice.
Clive Adamson, director of supervision at the FCA, said: "RDR has involved a major change to the investment advice landscape.
"While we have seen a lot of positive progress and willingness by advisers to adapt to the new environment, I am disappointed with the results of our latest review looking at whether advisors are clear with their customers on costs and services provided.
"We will be helping the industry again to understand our requirements with the release of a video guide but these results are a wake-up call and we expect the industry to respond."
The latest review is the second of a three-cycle assessment of how firms have implemented the disclosure elements of the Retail Distribution Review.
The first cycle of research was published in July 2013 and found that progress had been made and there was a general willingness to adapt to new rules. However, common issues were uncovered and further examples of good and poor practice were produced to help firms.
However, in the latest research, despite sufficient time and the straightforward nature of the requirements, issues remain. In particular, the second cycle found that:
- 58% of firms failed to give clients clear upfront generic information on how much their advice might cost;
- 50% of firms failed to give clients clear confirmation on how much advice would cost them as individuals;
- 58% of firms failed to give additional information on charges, for example not highlighting that on-going charges may fluctuate;
- 31% of firms offering a 'restricted' service (they cannot advise on the full range of financial products and providers available) were not being clear they were restricted, or the nature of the restriction; and
- 34% of firms failed to give clients a clear explanation of the service they offer in return for an ongoing fee and/or their right to cancel this service.
While failings appear widespread across the industry, wealth managers and private banks performed poorer than other firms in nearly all aspects.
The FCA will be starting the third cycle of its review in disclosure in the third quarter of 2014. If, at that point, firms are not complying with the rules on disclosure, the FCA has said it will consider further regulatory action, including referrals to enforcement.