What is RDR? It’s the Retail Distribution Review and it means massive changes to how we access and pay for financial advice from 31 December 2012 onwards.
Currently, there are a plethora of financial advisers, including independent financial advisers (IFAs), chartered financial planners, para-planners, wealth managers, multi-tied agents, tied-agents, as well as a legion of advisers in banks and building societies who may be any one of the above. Many appear to offer "free" advice, as customers don't have to part with any cash to get their finances reviewed. Instead, the adviser will collect a commission if they buy one of the recommended products. This payment is often disguised in complex product charges which can seriously dent the value of your investment over time.
But the FSA regulators are hoping that new RDR rules will put the provision of financial advice on a more professional footing. Not all companies currently operate on a commission basis, though: other advisers charge an hourly fee, while some do a combination of the two, charging a nominal fee which is then offset against any commission collected. In short, for those buying pensions, ISAs and other investments, it is more than a little confusing, which can make it difficult to find a trustworthy adviser. But the new rules should change this, making it far easier for customers to see exactly what advice.
Under the new regime, all charges have to be agreed in advance. Customers should get a simple document which sets out both the advice charges, as well as the charges for managing their money, which will be levied by the pension or ISA provider. Whilst this change should drive standards up across the board, with all advisers, required to gain additional qualifications and complete continuing training every year, it does mean that many banks and IFAs are throwing in the towel and may no longer be qualified to advise you on your investments into 2013.
And while most have welcomed these changes, there are concerns that this attempt to improve standards could see some people excluded from financial advice altogether. The main concern is that those on lower incomes won't be able to afford the £250-an-hour fee that better qualified financial advisers will charge. This problem has been exacerbated by the fact that high street banks appear to have withdrawn from offering any kind of financial advice as a result of these changes.
The new regime will create just two types of advisers: an IFA will be able to advise on all investment and pension products and will recommend products from across the whole market. In contrast, those offering "restricted advice" will – as the name suggests – offer a more limited service. In theory this sounds straightforward, but in practice there are likely to be different types of advice, possibly blurring definitions.
If you are concerned at the potential impact the RDR could have on your financial plans beyond 2012, you can contact the financial advisors on The Best of Barnstaple with confidence as they have already planned ahead and complied as required with RDR. Click here to see more information about them.
Member since: 10th July 2012
I'm Sarah and I live just outside Barnstaple near Umberleigh.
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