The Financial Conduct Authority says that following the changes in the advisory regime in January last year, too many firms "are 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 on-going services they provide".
The FCA's latest review into disclosure by financial advisers found 73% of firms falling short, 15 months after the retail distribution review (RDR) scrapped commission payments to advisers and confined the term 'independent' to those genuinely scanning the whole of the market.
The FCA said wealth managers and private banks performed worse than other firms in nearly all aspects.
Two firms with "egregious failings" will be referred to the FCA's enforcement and financial crime division - one financial advisory firm and one wealth manager.
The review was unveiled by Clive Adamson, the FCA's director of supervision, who is in the eye of the storm over a newspaper briefing on historic investment contracts ahead of the FCA's annual report publication a week ago.
MrAdamson 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 advisers are clear with their customers on costs and services provided."
The results were "a wake-up call and we expect the industry to respond", Mr Adamson said.
The regulator said its review aimed "to ensure that consumers have the information needed to make informed decisions, and are clear on the costs and services of advisory firms to improve competition in the market".
The review found 58% of firms failed to give clients clear upfront generic information on how much their advice might cost; 50% failed to provide a specific estimate to individuals; 58% failed to give additional information on charges, for example not warning that ongoing charges may fluctuate; 31% 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% failed to give clients a clear explanation of the service they offered and their right to cancel.
Stuart Dunbar, managing director at Argyle Consulting in Glasgow and Scottish spokesman for the Association of Professional Financial Advisers, said he found the survey results "very surprising".
He went on: "Customers should be able to ascertain the information referred to in the FCA report from the mandatory disclosure documents, which all advisers are obliged to provide to clients at the earliest opportunity."
He said the findings might be down to factors such as the number of firms sampled, and the type, scale and location of those firms included.
Mr Dunbar said he was confident that the next review would demonstrate that the advisory industry had embraced the new regime.