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I don't think it is going to dramatically change. Most contracts have been moving to fee basis over the last 5-10 years. Not many actually pay commission any more (commission as defined by a payment by the provider that does not match the charges taken). Most are explicitly charged with the adviser being paid exactly what the charge is with no commission factoring involved. There are still some exceptions and they will go but for investments, the bulk are explicit.

The main difference is that natural trail will be gone. However, explicit trail will be fine. The adviser will have to state their fees and what you get from them. So, you will be able to hold them to do what they said they would do (currently natural trail is officially part of the initial advice although many do use it to pay for ongoing services).

What it should do is stop transactional advice from getting ongoing fees (unless the fee for initial advice is taken over a period - such as on regular contributions). it will also mean everyone signs a fee agreement at the start saying how much it costs and what they get. So, this should prevent the greedy sorts taking large amounts on large investments. For small amounts, there wont be the ability to cross subside those as they currently are. So, charges are expected to rise for small investors (due to the coming down in larger investors). mid sized investments will likely see little difference.

There is more admin and more requirements but as we have been moving closer and closer to RDR, the changes have been implemented gradually and have been adopted by most and it wont suddenly be a dramatic change unless you deal with a firm that has had it's head buried in the sand or you deal with someone that is holding on to the end of the year doing things the old way with no intention to continue post RDR.

I think the platform review and move to clean share classes will have a bigger impact on the investment world than RDR.

angryofacaciavenue wrote: »

One of your IFA posters says that costs will increase for smaller investors.

Unfortunately, the majority of commission-based IFAs have done all they can to forestall the RDR including making much of their apparent concern for small investors.

IFAs don't deal with clients without enough funds to make it worth their while now and I don't expect that to change. If they could sell someone an investment for £250 of commission then they'll sell them an investment for £250 of fees.

The intended difference being that the client is made fully aware that he isn't getting anything for free.

With regard to platforms. Yes thay have low charges for regular investors, but for a small investor making a 'one off' investment they will be paying additional administration charges for a service they will never get the full benefit of.

Who will? Are you a commission-based adviser by any chance posting for the first time ?

One of your IFA posters says that costs will increase for smaller investors. This will surely drive them away from seeking independent financial advice, perhaps into the hands of banks that have a less than good track record in this area.

Even the FSA acknowledge that.

With regard to platforms. Yes thay have low charges for regular investors, but for a small investor making a 'one off' investment they will be paying additional administration charges for a service they will never get the full benefit of.

That largely depends on the platform being used. Remember that going direct to fund house is the default charge effectively and presently typically the most expensive option (bundled platforms at worst equal it on costs but are usually cheaper). Unbundled platforms could well end up more expensive for some groups of people.

It looks as if the whole charging structure will become even more confusing for 'ordinary' people to understand. We understand advisors are not doing it for free, they have to eat after all, but as long as their commission is clearly explained at the outset and they do as agreed where is the problem ?

I have mixed views on this. On the one hand transparency is good but on the other, it does make it more complicated and largely ends up with the same result. e.g. old option says 1.5% total whereas new world would be 0.5% here, 0.5% there and 0.5% over there. It still makes 1.5% total.

When you buy food from the supermarket, you dont get a breakdown of who is getting paid what out the money you pay or indeed in any other retail distribution channel.

I am also concerned about an area that has not been mentioned. Advisers used to be 'tied' or 'independent' , or the dubious 'multi tied' now we will have' basic', 'simplified', 'restricted', 'unrestricted' and this is progress. Who thought this up ? This is not progress and not helpful for people looking for help with complicated matters which people can find confusing and has serious consequences when it goes wrong.

It is nearly as "clear" as the FSA definitions for mortgage advisers where whole of market does not mean whole of market and where independent is more whole of market than whole of market..... The FSA really need someone to look at what titles actually mean and make them understandable. Whilst they are at it they should prevent the word "adviser" being used in any customer/client role unless that person actually is an adviser. God knows how many times we see people saying they spoke to an adviser but in reality they spoke to a clerk. The banks, in particular, over use the word "adviser" (and manager) to give a different impression.

There are an awful lot of flaws with the RDR. There are some positives as well. The most frustrating thing is that the FSA knows it is flawed as it's own review said it was. yet they didnt want to change it because it would make them look bad.

Rollinghome wrote: »

The other important feature of the RDR will be the increased qualifications required. It's absurd that the majority of IFAs have had no more than a level 3 vocational certificate, the same level as the City and Guilds in hairdressing held by my barber.

You got that one right.

Always makes me chuckle when these salesmen (I refuse to call them advisers) boast about how they are well qualified to sell their products and tell us no one else is qualified to suggest products or strategies. Fact is their qualifications are eqivalent to junior school tests.