MSE News: Banks not giving adequate investment advice, says FSA

seriously, while there is a real issue about RDR pricing smaller investors out of the market for proper financial advice (by removing cross-subsidies), the high street banks have never been giving proper financial advice.

I don't necessarily agree. Lets say an old investment pre RDR paid a 3% commission and a trail of 0.5% p.a. On a £10k investment, thats £300 initial. Lets say an adviser would do it for £500 initial post RDR. Thats £200 more but there is no need for trail on an investment that size. So, that is 0.50% a year cheaper. Within around 4-5 years the cost to the individual is the same and beyond that it is cheaper.

The bigger issue to the smaller investor is the platform review which is increasingly bringing in other products and not just platforms. The banning of backhanders or undisclosed commissions between fund house and platform means explicit charging needs to come in its place. Explicit charging tends to be better for larger investors and worse for smaller ones as there is less cross subsidy (still some but to a lesser extent) and companies are less inclined or even unable to price in loss leaders.

There perhaps also needs to be a recognition that if you can only afford tiny amounts to invest then really you shouldnt be investing as it would suggest you dont have enough cash savings to make it worthwhile. There will be exceptions to that but there are some people who do not hold enough cash back before they go into investing and when the first large loss comes, they pull out because they cant afford to lose any more. They are the ones that shouldnt be invested in the first place.