A Financial Adviser is for life not just for Christmas
New rules governing how financial advice is given may have some unintended consequences for many clients of financial advisers.
From January 2013 The Financial Services Authority (FSA), through the Retail Distribution Review (RDR), has set new rules to drive up standards of professionalism. This brave new world has not only banned commission payments on all retail investment products (including pensions) it has also asked financial advisers to be better qualified than they have ever been.
Whilst this is good news for consumers it does have some unintended consequences.
Clients of well established, highly- qualified professional advisory firms like Brett Investment who understand that advice is valuable and not free of charge have nothing to fear. Those that aren’t may not be so well catered for post RDR, and may become what I’d call ‘unintentional orphans’.
Who is vulnerable?
Amazingly industry figures suggest that 46% of clients still believe that advice is free! Friends, work colleagues and family members who may be under the impression that ongoing advice and investment reviews are free of charge may find that future reviews from their current financil adviser become less frequent and not quite as thorough. In a quirk of the new regulations, an adviser recommending a change to existing investments, possibly because of a dip in performance, would lose any recurring or regular trail commission associated with that investment.
Commission based advisers offering active advice at regular reviews have, in effect, been dis-incentivised.
Of course it is early days yet and these advisers may well join the ‘new model adviser’ revolution and move away from the selling of financial products to provide genuine financial planning that , as the world becomes increasingly complex and fast moving, becomes ever more invaluable.
Some of this may become too much for many financial advisers and therefore they may decide that enough’s enough and leave the industry altogether or instead ditch their independent status in favour of giving restricted advice supported by an insurance company.
If this happens to anyone you know seeking out a well qualified, experienced financial planner maybe the best investment they could make this year.