In the guide, the regulator identified five questions for clients to ask their adviser in a bid to help discussion of these changes.
These questions are as follows:
- How much will your advice cost me and how is this calculated?
- Can you explain the different ways that I can pay for advice?
- Can you explain what products you can advise me on and any areas you can’t help me with?
- How often will you review my investments?
- Can you show me proof that you are qualified to give advice?
Linda Woodall, FSA head of investment intermediaries, argued that the RDR changes will improve customer confidence: “We want people to feel that they are getting a service from their financial adviser that is relevant to their circumstances and in their best interests.
“These changes are about making the cost of advice clearer, where else would you buy something without knowing in advance how much it costs? Customers will now know how much advice is costing them, the service that they are receiving and be reassured that their adviser is qualified.”
The RDR is the FSA’s most extensive and far-reaching policy project to date, with the aim of improving the quality of advice, reducing mis-selling and, in the longer term, improving the level of consumer confidence and build general levels of trust in advisers.
Key changes which have come into force in the UK include “making the cost of advice clear to the client”, in part by banning commission payments from product providers to advisers, the FSA stated.
Advisers must also be qualified to a higher professional standard, subscribe to a code of ethics, carry out at least 35 hours of continuing professional development a year and hold a statement of professional standing from an accredited body.
Financial advisers will further have to clearly describe their services as either ‘independent’ or ‘restricted’. Advisers that provide ‘independent’ advice will be able to consider all types of retail investment products which could meet the customer’s needs and consider products from all firms across the market.