After more than 6 years discussion implementation of the Financial Service Authority’s long running initiative the Retail Distribution Review (RDR) began in earnest on 31St December 2012. From that date the FSA will now force all financial planners to charge a fee for their services. This is good news for consumers in that they will at last be able to identify the true cost of financial planning advice.
It brings financial planners in line with accountants and solicitors and naturally the legislation insists that all advisers have minimum qualification levels. There is a concern that many practitioners will be forced to leave the industry because they have chosen not to attain the relevant qualifications or they are still working towards them. Current estimates are that the existing level of 37,000 advisers will fall to around 20,000 by the end of 2013. There is a concern that the middle market – the average investor – will struggle to locate a financial planning firm who offer affordable fees.
So, the good news for the client is complete transparency of costs, the not so good news is that there could be an advice gap and demand could outstrip supply. The Banks in particular have all but abandoned their previous advisory models and made redundant thousands of staff. Where will their customers go now?
Consumers should not be concerned that they will now have to pay for something that was previously free, on the contrary. Now they will be in a position to negotiate costs and at the very least be able to make an informed choice rather than having to search through all the small print to identify previously hidden charges and fees.
Advisers are now obliged to provide up front and in writing the basis of their fee charging structure before advice is given. So shopping around will be the order of the day even where the adviser has been in situ for a many years.