The Retail Distribution Review (RDR) comes into force from Monday 31 December 2012, but what does this mean for those who are paying for advice?
There has been an overhaul of the disclosure of what you pay, how you pay and the advice (at point of sale and ongoing). The idea being that the advice received is suitable, you are aware of any restrictions i.e. independent or restricted; and the associated costs.
I am an independent financial adviser (IFA) under the old and new regime. The service provided has always been detailed with an ongoing service as the advice process starts with the purchase of a financial product and on-going advice is paramount (in my opinion). Make sure you receive what you are and have paid for –
The Financial Services Authority (FSA) outlines the changes which will directly impact – and hopefully benefit – the everyday investor:
1. Know how much advice costs
“Advice has never been free. You may not have realised but if you received financial advice before our changes came in you probably paid ‘commission’ to your adviser.”
“This generally came from the company providing the product paying your adviser a percentage of the sum you invested.
“Instead of you paying commission on new investments your financial adviser now has to be clear about the cost of advice and together you will agree how you will pay for it.”
“This way you know exactly what you are paying and that the advice you receive is not influenced by how much your adviser could earn from your investment.”
“Your adviser now has to clearly explain how much advice costs and together you will agree how you will pay for it. This could be a set fee paid upfront or you may be able to agree with your adviser that they can take the fee from the sum you invest.”
2. Know what you are paying for
Is this a transactional item, on-going advice and defined service to be provided.
While many advisers are remaining independent, some have changed their business models so that they only give “restricted” advice.
“Financial advisers that provide ‘independent’ advice can consider all types of investment products that might be suitable for you. They can also consider products from all firms across the market.”
“An adviser that has chosen to offer ‘restricted’ advice can only consider certain products, product providers or both.”
“Your adviser now has to clearly explain to you whether they offer one or the other.”
Get improved professional standards“Some investments can be hard to understand. So the minimum professional standards of qualification have been increased….”
“Financial advisers also have to sign an agreement to treat you fairly.”
3. What should you do now?
“Next time you see your adviser you should ask how much you have been paying for their advice and how much that same advice now costs.”
“Next time you see your adviser you should ask how much you have been paying for their advice and how much that same advice now costs.”
“They should also be able to explain how the changes to the way you get and pay for financial advice affect you, and whether they offer independent or restricted advice.”
Happy New Year and good luck investing in 2013
welshmoneywiz 