Financial Advice – The way it is changing.

The news and media have devoted a lot of coverage to the changes that, with effect from 1st January 2013, resulted from the Retail Distribution Review. Often simply called RDR, this is a key part of the consumer protection strategy of the Financial Services Authority (FSA).

RDR has brought a number of changes, the most important of which comes under three headings: advice, qualifications and charges. These changes are described below.

Advice

All financial advisers must tell their clients about the types of service they will offer and make it clear whether they are providing Independent or Restricted advice.

Independent advice means that firms can provide advice on products and providers from the whole of market.

Restricted advice means that firms can only provide advice on a limited range of products or providers.

 

Qualifications

Financial advisers must now be qualified to a new higher standard than was previously required to ensure that clients benefit from a high level of technical knowledge and expertise. A Statement of Professional Standing from an accredited body will be required in addition to the new minimum Level 4 accreditation (Diploma Level).

Charges

The new RDR rules stipulate that financial advice be paid for by means of a client fee rather than commission from product providers on investment and pension related products. This ensures that there is no commission bias to promote one product or provider above another. The fee can be paid either up front or deducted from the investment and agreed at outset.

'This is great news and brings our industry into a profession'

Ged Dixon and Morlaix have gone one step further and achieved Chartered Status, the gold standard for financial planners. This carries a Level 6 accreditation, equivalent to a degree.