On 25th November, the Financial Services Authority published feedback on the Retail Distribution Review (RDR). The extra clarification of the distinction between independent and non-independent advice is welcome, and we support the widened availability of financial advice to consumers. However, it is important to get the distinctions with the sales category right, to ensure that it gives sufficient value and recognition to the full financial review and recommendation process.
Independent advisers must provide unbiased, unrestricted advice based on a comprehensive and fair analysis of relevant markets, and the payment for that advice must be agreed between the adviser and customer only, clearly disclosed and separately identifiable from the product costs. Providers can facilitate the payment for advice through the product but indemnity commission will be banned. This is a clear signal to providers and independent advisers that they have only four years at most to adapt their business models and systems to the new environment.
Trust in our industry has been seriously eroded in recent years, so the FSA's proposal to establish a Professional Standards Board and the requirement for the same levels of competency regardless of status are a key step in rebuilding confidence. The FSA recommends a minimum qualification of QCA level 4 (CII Diploma in Financial Planning), but clearly wants advisers to aim higher, and we support that.
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Lifetime and annual allowances