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MSE News: Guest Comment: How financial advice will change for good

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MSE News: Guest Comment: How financial advice will change for good

edited 30 November -1 at 1:00AM in Savings & Investments
69 replies 8.1K views
MSE_GuyMSE_Guy MSE News EditorMSE Staff
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edited 30 November -1 at 1:00AM in Savings & Investments
This is the discussion thread for the following MSE News Story:

"If you have a financial adviser there are fundamental changes coming which will affect how you access and pay for advice ..."
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  • RDR: we need better advice – are we prepared to pay?

    The Retail Distribution Review will change the way consumers get financial advice.



    paul-farrow_1372199j.jpg
    By Paul Farrow

    6:15AM BST 16 Jul 2011
    comments.gifComment


    Would you be concerned if you discovered that your doctor only had an A-level to his name, rather than a full qualification? Probably, but when it comes to financial advice there is a chance that your adviser could have fewer qualifications than you think.

    But that is about to change – soon financial advisers who want to be able to label themselves "independent" will have to have a higher qualification. The new requirement forms part of the Retail Distribution Review (RDR), which will radically change the way you receive financial advice – and hopefully for the better.

    As it stands today, anyone looking for a financial adviser has to pick their way through independent financial advisers, whole-of-market advisers, multi-tied advisers and sales representatives of product providers such as banks and building societies.

    Some advisers are paid commission for their advice, others receive fees instead, while some receive both forms of payment. In short, it can be all a little confusing.

    The Financial Services Authority (FSA) is proposing from the end of next year to have just two main types of adviser – an independent adviser who offers products from the entire market, and a sales adviser, whose primary purpose is to sell a product from one or more providers.


    Crucially, advisers will no longer be able to be paid commission by product providers.
    In the FSA's words, the aim of RDR is "to establish a resilient, effective market, where consumers can have confidence and trust at a time when they need more help and advice".
    But according to a recent report from Aviva, around three million people will struggle to get decent advice once the new rules come into force, because IFAs will target higher-net-worth individuals after the RDR.
    There has long been a concern that the RDR will result in a two-tier advice system, with the majority of people ending up simply being sold products rather than being advised on them.
    In its current form, the RDR is likely to see more consumers opt for advice from their local high street branch rather than an IFA. Given recent actions from the banks, people may not even be sold products – they may have to go it alone.
    That appears to be the message from Barclays after it closed down its advice arm earlier this year.
    The FSA is right on one point – we are going to need more help and advice. Younger generations certainly face an uphill struggle. It is not just pension provision that will be a massive issue in years to come, so too will long-term care.
    Here again it would seem the banks do not want to help. It was not so long ago that HSBC decided to enter the long-term care market with the acquisition of the Nursing Homes Fees Agency. In its statement at the time, HSBC said that it "forms part of the bank's strategy of evolving its range of later-life services to fit with the extraordinary changes over recent years as identified by our Future of Retirement study".
    Fast-forward five years and HSBC says long-term care is very much a niche market and, as such, "no longer forms part of the group's strategic direction".
    It might be a niche market, but long-term care is a growing problem that is increasingly being debated in Westminster. Living longer has its downside, unfortunately, and care fees are an expensive business.
    Maybe HSBC's recent decision was based on its latest Future Retirement Report, which shows we do not care too much for our elderly parents. Its 2011 report says our biggest fear is not caring for elderly relatives, but falling household incomes that will leave us more worse off in old age than our parents.
    There is a serious point. The Aviva report shows people talk to their friends, go online and visit their bank before seeing an IFA. And this is before RDR has seen the light of day.
    We should be trying to encourage consumers to seek decent financial advice, yet the RDR might scupper this. The Treasury Select Committee now wants the whole process postponed by a year to allow advisers more time to get qualified, yet they have had four years to do this. The clock is ticking, but as it stands the RDR is a long way from restoring consumer confidence.
  • MacMicksterMacMickster Forumite
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    Whilst the intention is obviously to ensure that clients receive advice that is unbiased by the amount of commission on offer, I fear that it will leave many choosing to rely on advice from "the bloke in the pub" rather than pay a professional for their expertise.
    "When the people fear the government there is tyranny, when the government fears the people there is liberty." - Thomas Jefferson
  • LokoloLokolo Forumite
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    Although they have made the article based on all advice options i think it would have been appropriate to have information on platforms such as HL which will also changepost RDR.

    A lot of the changes will mean low cost investors or clients bing priced out which isnt a good thing.
  • I think the most important RDR change is bringing fees into the open.

    I believe some people will be discouraged from taking advice.

    I also believe that currently far too many people are lured into investment products long before they have built up sufficient savings on deposit, because excessive levels of commision can make it worthwhile for an IFA to advise on a very small portfolio. If people can be encouraged (by the likes of MSE maybe?) to remain in simple savings accounts until they can see the merits of paying £1000, £2000, or whatever an IFA quotes them for proper advice then so much the better IMO. In this ideal world of mine there will be less work for IFA's but the best of them will survive and prosper, along with their clients.
  • edited 30 September 2011 at 6:28PM
    dunstonhdunstonh Forumite
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    edited 30 September 2011 at 6:28PM
    For however much things change, they stay the same. Call things by new names, change the disclosures but the end result is much the same for most independents. Most IFAs I know are either giving up before RDR or are already working that way and have been for some time.

    Tied agents and transactional advisers are going to be where the biggest "shock" is.
    A lot of the changes will mean low cost investors or clients bing priced out which isnt a good thing.

    A lot of people already are. The more qualified and experienced/professional advisers tend to focus on those with more wealth. That leaves the bottom end to deal with banks, tied sales reps and newbie advisers.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • The financial system is a pyramid scheme, and it's always the majority at the bottom who get shafted.

    The rich don't really need financial advice.
    The just need a portfolio manager who spread their risk and sit back and enjoy their 5%. Any bank can do that for them.

    It's the low income who work for their little piece of heaven that need help. Whether it's pro bono advisors, Citizen Advice, or another quango, we need to have advisors who are NOT PAID AT ALL.
  • jem16jem16 Forumite
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    Pincher wrote: »
    The just need a portfolio manager who spread their risk and sit back and enjoy their 5%. Any bank can do that for them.

    Never seen a bank with a protfolio manager. With a bank you choose the investments - might as well go DIY than use a bank.
  • dunstonhdunstonh Forumite
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    Whether it's pro bono advisors, Citizen Advice, or another quango, we need to have advisors who are NOT PAID AT ALL.

    Who is going to pay for them?

    The FSA wants to get rid of cross subsidy.
    The rich don't really need financial advice.

    The options available to the rich are greater than the poor.
    The just need a portfolio manager who spread their risk and sit back and enjoy their 5%. Any bank can do that for them.

    Would you like to name a bank that does that and not under advice?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dunstonh wrote: »
    Who is going to pay for them?
    The FSA wants to get rid of cross subsidy.

    I know even Citizen Advice Bureau is cutting back,
    but there is every need for unpaid, and unbiased advice.
    I'm just pointing out there is no real intention to help the lower income group.
    dunstonh wrote: »
    The options available to the rich are greater than the poor.
    Would you like to name a bank that does that and not under advice?

    Loads of banks have private banking arms intended to leech off the rich. I filled out a portfolio manager form with a divorcee who had a nice settlement. She had no idea what it was all about ten years ago, and any advice so far have totally gone in one ear and out the other. She just gave them total discretion. Not even environmental and moral restrictions: just make me some money. She wasn't dumb enough to give one firm all her money, though.

    You might be conscientious about sector allocation, immunisation, casflow projection, but that's what they pay you for, so they don't have to bother with the details. As far as the rich is is concerned, here is a lump of money, you were recommended by a friend, do you stuff. All that financial advice talk bores them.
  • scotsbobscotsbob Forumite
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    Good news but why has it taken so long? Financial advisers, or salesmen as I prefer to call them, have been shafting the gullible in their quest for high commission payments for far too long.
This discussion has been closed.

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