How is financial advice paid for?
Have you ever wondered how advisers get paid, whether that’s your independent financial adviser or tied bank adviser?
How do consumers pay for advice?
It’s never free!
Some of you might well have heard the phrase “The Retail Distribution Review” in the media over the past months. This is being introduced at the end of a five year consultation between the Financial Services Authority (FSA) and the industry in general. What is it all about?
There are two main elements – one is that financial advisers will all have to be qualified to a new minimum standard by 31st December 2012. Secondly, and most importantly, commission will no longer exist for new investment advice.
Commission has created the myth that advice is “free”. What has happened in the past is that product providers have created products and attached commission to them and distributed these products to consumers. This created a scenario where the product provider sat at the top of the chain with the customer at the bottom and the distributer in the middle.
So what?
On the 1st January 2013 product providers will no longer be able to design products and build in commissions to incentivise their sales force or other distribution channels. This is a welcome change. The client now sits at the top of the chain, pays a financial adviser a fee for the advice and implementation of the recommendation and the adviser then selects the most suitable product or portfolio of funds for that client. There can be no bias because the product provider or fund manager can no longer pay commission so the adviser only gets paid directly by the client. Products and investment funds will be much more transparent as there will be no in-built commission and you will clearly be able to see what the provider is charging you and what your adviser is charging you.
At Gibson Financial Planning we have operated a set fee structure for investments and pensions for years and our advisers are all qualified to meet the new standards set by the Retail Distribution Review (RDR).
We’re looking forward to the new world. It’s in the interest of all our clients and financial consumers.
If any of you wish to discuss this in more detail or to arrange a financial planning review please do get in touch with us and we will arrange a no-obligation appointment for you at our cost. You can email us hello@gibsonfp.com
The Future. Secured.
By David Gibson
