Three quarters of financial advisers fail to provide clients with enough information about the cost of their services, and customers could be misled, the Financial Conduct Authority (FCA) has said.
The regulator said advisory firms are also failing to properly outline the type of service they offer (for example, whether they are independent and can access all of the market or whether they are restricted to certain providers) and what ongoing services they provide.
Some 58% of firms fail to give clients clear upfront information on how much their advice might cost and additional information on charges (such as how ongoing charges may fluctuate).
The FCA also found that just over a third of firms didn't clearly explain the service they offer in return for an ongoing fee or that clients have the right to cancel this service.
Moreover, 31% of firms offering a 'restricted' service were found not to be making clients aware that they were not able to recommend the most suitable products from the entire market.
The FCA added that while failings "appear widespread across the industry", wealth managers and private banks performed poorer than other advisory firms.
Clive Adamson, director of supervision at the FCA, said: "I am disappointed with the results of our latest review looking at whether advisers are clear with their customers on costs and services provided."
He added: "These results are a wake-up call and we expect the industry to respond."
Patrick Connolly, a chartered financial planner at advisory firm Chase de Vere, said: "We fully support the reviews undertaken by the FCA to ensure that there is greater transparency over advice charges. The FCA needs to work with individual advice firms to ensure this happens as this will result in the best outcome for consumers."
He added: "It is really important that consumers know how much they're paying for financial advice, how they're paying for it and what services they're getting in return. This way they can understand if they're getting good value.
"It is also imperative that they understand whether they're getting advice from an independent or a restricted financial adviser. Often this isn't clear."