Whilst it may not mean much to the man on the street yet, the three letter acronym RDR and its ramifications to the Financial Services industry has occupied more column inches in the trade press than any other single topic over the last 24 months. The RDR – or “Retail Distribution Review” to give it it’s full snappy title – which comes into force on January 1st 2013 will radically change the way that advice is both delivered and paid for in the UK.
After a lengthy and detailed review, the Financial Services Authority (FSA) which regulates the industry came to the conclusion that payment by commission – the traditional method of payment adopted by distributors of pension and investment products – was leading to product bias and in turn consumer detriment – in other words, some advisers were placing investments into products that paid the most commission rather than those that were most suitable for the client’s needs. To rectify this the FSA have, with effect from 1st January 2013, introduced a ban on the payment of commission for investment and pension advice and instead introduced the concept of Adviser Charging (or fees to you and me!). Any payment for advice will need to be agreed in writing with the client and met from the client’s own funds either directly via a cheque or deducted from the amount invested. Any on-going fees will also need to be agreed in advance and clients who feel they are not receiving the service that they are paying for will be entitled to cease payment themselves or instruct their product provider to cease payment to their adviser at any time.
In addition in this brave new world of payment for advice, advisers will need to be better qualified and will have to choose to be either “independent” or “restricted” depending on their commitment to provide advice across the whole market or limit their advice to the products of either just one or a selected “panel” of providers. A detailed guide to the changes can be found here http://www.standardlife.com/static/docs/2012/rdr029.pdf)
At Provisio we have been operating a high quality, independent, fee-based service since March 2008 and our clients will notice little or no change in the advice they receive or the way that they pay for our services. Our “Chartered” status is evidence of our highly qualified staff and we are committed to remaining “independent” for 2013 and beyond. Plus ça change…
Please contact us on 01462 687337 or visit our website for a glimpse into the future of financial advice.
Andrew Whiteley DipPFS