The rules of financial advice are changing, with some financial advisors more keen to continue playing than others.
New regulation – the Retail Distribution Review (RDR) – will mark the beginning of a new era in how clients pay for and receive financial advice. Payments to Financial Advisors will no longer be commission-based, and in an attempt to stop the trend of mis-sold advice incited by product bias, all costs to clients will be agreed upfront.
The Good, the Bad and the Ugly
The RDR will enforce all advisors to acquire a new “Level 4” qualification which could cost up to £7,000 – a deterrent to some companies who are considering shutting down their services in light of these costs.
Meanwhile, advisors who thrive off of large commission-based sales are likely to become stuck – forced to either move to fee-based advice or stop their services all together.
Some in the industry have warned that the costs of an Independent Financial Advisor (IFA) are bound to soar for the consumer.
But others disagree, arguing that the only real change will be how clear costing for advice will be. The FSA’s aim is to avoid any hidden or surprising costs to the consumer – with one key change enforcing advisors to clearly label their advice as “Restricted” if it covers only a limited panel of financial products.
Financial Advisor Rallying Call
In an attempt to distinguish themselves, some advisors have already embraced these changes by gaining higher qualifications. A number of IFAs have also become ‘RDR-ready’ – while others are inviting clients to post online reviews of their service – a move which they hope will minimise the apprehension of future clients.
A spokesman for the RDR stated “there is clear evidence that the industry is well advanced in its preparations, with 49pc of advisers already qualified and at least 82pc expecting to remain as retail investment advisers.”
While some may view the next 6 months as a last chance to flog products which earn them maximum commission, others are looking forward to and welcoming the trust and positivity that the RDR will restore to the industry.
The Right Advisor
Determined to encourage new regulations and increased professionalism within the industry, a new website – VouchedFor.co.uk – has recently launched with industry backing, allowing clients to find, rate and review Financial Advisors.
The website clearly states where an advisor holds a higher qualification, and displays reviews from existing clients, allowing potential consumers to more easily evaluate and discover the right advisor for them.
This is a guest blog from Lewis Spratt, Head of Client Communications at VouchedFor.co.uk
Retail Distribution Review