It’s been almost a year now since the Retail Distribution Review (RDR) came into affect on December 31st 2012. The RDR, although it may not sound so familiar, may have affected you more than you might think.
To put it simply, the RDR was aimed at improving public trust and confidence in the market and avoiding recurrences of the mis-selling scandals of the last decade whilst further aiming to become more transparent with consumers in regards to what they’re paying for when it comes to financial advice. Originally, financial advisers were able to provide their services without charging an upfront cost, and instead could take their fee through a commission from your investment, typically between 1% and 8%. For example if you invested £10,000 through a financial adviser, you could have ended up paying between £100 and £800 to an adviser, with this money being deducted from your investment.
However, new changes to the ways an adviser can charge you for advice mean that financial advice has become a lot more transparent in terms of knowing exactly how much and what you’re paying for. So, instead of being charged a commission, an adviser will need to now explain to you how much advice will cost, and how you will pay for it. This could be charged as:
- An hourly rate
- A set fee according to the work involved
- A monthly retainer
- A percentage of the money invested
Financial advice never has actually been free, but now you’re in a position where you can see exactly what and how much you’re being charged, putting you in a stronger position to negotiate more for your money, as well as driving a higher standard of service via increased minimum standards and making complicated financial products easier for you to understand.
Independent vs. Restricted Advice
Financial Advisers now have to either offer ‘restricted’ or ‘independent’ advice. An independent adviser can offer a ‘whole of market’ service, advising on any kind of financial product, whereas a restricted adviser can only offer advice on certain products. A restricted adviser on the other hand, can generally only recommend certain products, product providers, or both.
However, whether you deal with an independent or restricted adviser, they can no longer be incentivised to recommend one product over another. This means they can not be paid commission through product providers for investment business; therefore, generally you are charged an upfront fee for advice and know exactly how much you are paying.
Paying for Financial Advice
Whilst it may seem daunting paying for financial advice, it should be understood that, as previously stated, financial advice has never actually been free and the method in which you pay has merely been changed so that what you’re spending your money on is more transparent. Furthermore, the new payment methods mean that you can negotiate with advisers to get more for your money.
Finding an adviser
There are many ways in which you can receive both independent and restricted advice, however, Shepherds Friendly do not provide direct financial advice, but we can provide access to financial advice.
Shepherds Mutual Solutions can answer any initial questions free of charge within 60 minutes during working hours. However, any in depth advice which will result in you making an investment will require you to pay a fee in the same way you would do with any adviser. This payment method can be further negotiated.
If you have any other questions on the RDR and how it affects you as an individual, or you would like to receive some financial advice, then please do contact one an adviser, either through the Shepherds Mutual Solutions via our onsite question box , or by phoning 0800 192 1245.