Most people that seek advice from an independent financial advisor do so because they believe that this is the best way to gain unbiased advice on how to get the most from their investments.
However, did you know that before the new RDR regulations came in to play, many independent financial advisors were actually receiving an income from the very funds that they were recommending to their customers. And, that this income could actually influence the funds they were offering.
Thankfully, under the new regulations such a practice will now become obsolete. Meaning those IFA’s that continue to provide truly independent advice solely focused on the needs of their customers will be much easier to identify.
How the RDR Regulations Have Changed the World of Investment Advice
The Retail Distribution Review (RDR) came in to force in the early part of January 2013 by the fsa and can benefit every customer who chooses to take financial advice.
1. No More Indirect Commission Payments
The most significant change that the RDR has made is to stop all indirect payments to financial advisors from the funds that they sell. This means, that instead of paying your financial advisor indirectly through the products that you buy, you will now pay them up front for the advice they offer.
Not only will this stop advisors being influenced by certain funds that provide a higher level of return for recommendations, but it will also make it clear to the customer exactly what kind of income the advisor is actually receiving for their advice.
As the customer, you can then choose a financial advisor that provides the level of pricing and advice that you require. This could be in the form of a flat fee or hourly rate for the services you receive or an ongoing percentage against the overall value of your portfolio.
2. Independent vs. Restricted / Tied Advice
The new regulations have also made it possible for IFA’s that are truly independent to be highlighted as such.
Those advisors that do not offer the entire range of financial products to their customers, or have experience in just one section of investing, have now become categorised as restricted, tied or multi tied financial advisors.
However, those that have a full knowledge and access to the entire financial market and focus solely on the needs of their customers will continue to be labelled as IFA’s (‘Independent’ Financial Advisers).
3. Higher Level of Qualification
Furthermore, the RDR has also increased the minimum level of qualifications required for all IFA’s. This has meant further training and exams for those that were previously less experienced, a standard that many truly independent advisors have welcomed with open arms.
But What Does The RDR Mean For You?
Basically, these new standards give the customer greater power to understand the type of advice they are getting when they choose a financial advisor.
For those that are happy with a limited range of investment options from a restricted/tied/multi tied advisor, it is now possible to specifically choose such a service.
However, for those that are looking for full and professional advice from a fully qualified advisor who is truly independent, it has never been easier to find one.
Furthermore, there is no longer the worry that the advice you will be given will be tainted by external factors. Those that have retained their IFA label should continue to provide outstanding financial advice for all customers without the name of independent financial advisors being tainted by those who used to provide a second rate service.
What to Do Next
Speak with your financial adviser and find out their status. Though there will be an upfront fee for advice on buying future funds, the absence of indirect commission payments should be reflected in reduced annual management fees to compensate for the new arrangement.
However, if you find that your financial advisor has been recategorised as restricted/tied/multi tied and you are not happy with this, then now is the time to find an IFA that has retained their independent label to get the quality advice you need.
If you would like to speak with an independent financial adviser then please call 0800 233 5244 or fill in the online enquiry form here.