All change for financial advice industry

The Financial Services Authority has put a stop to commission based selling of financial products by advisors.

The new rules, part of the FSA’s “retail distribution review” (RDR), will mean advisors can no longer be paid commission for selling firm’s products.

Now, advisory firms will have to clearly state their position as independent, or restricted to selling the products of certain companies.

Pensions, Isas and unit trusts fall under the new rules that are designed to combat the mis-selling that has dogged the industry.

Advisors will now have to charge upfront fees for providing their service, and clearly stipulate whether that fee is fixed, by alloted time, or as a percentage of the amount to be invested.

The new rules also demand higher qualifications of advisors. Previously, advisors were required to hold a level three in the Qualifications and Credit Framework (QCF).

Now they will need to hold a level four qualification, which is equivalent to that of a first year undergraduate programme, say Standard Life.

In addition to this, advisors will be required to study for at least 35 hours per year as part of their ongoing professional development.

In November Bestinvest published the findings of a study into consumer attitudes towards financial advice.

The results suggested that fee transparency is unlikely to encourage the use of advisors among investors.

Titled “Death of a Salesman and the Rise of the Self-Directed Investor”, the report claimed the RDR rules will prompt more DIY investors to emerge as they try to keep costs down.

This was posted in Bdaily's Members' News section by Tom Keighley .