As some of you may be aware, there are some changes on the way for Financial Advisers. January 1st 2013 marks the introduction of the FSA’s Retail Distribution Review (RDR). At Kelvin Financial Planning we are ready for RDR but we feel it is important that consumers are aware of the imminent changes.
Whilst not exhaustive, this blog post is intended to provide you with information on the parts we feel are relevant to you.
The RDR will result in a number of changes to the financial services industry. These changes are intended to improve the outcomes for financial services users and improve confidence in the industry.
What changes are proposed and what are the implications for you as a client?
Increased Levels of Professional Standards
The minimum level of professional qualification required to provide regulated financial advice will increase from 1/1/13. This is intended to improve the knowledge and professionalism of those providing financial advice.
At present, it remains to be seen what percentage of the adviser community will attain the levels required. However, there are indications that this issue will force many into early retirement or down other career paths.
Kelvin Financial Planning advisers are all qualified beyond the 2013 requirements, our clients will not feel any impact as a result of this legislation.
If you are considering taking financial advice and expect to receive ongoing service, this is an issue you should be aware of. We feel you should ask any prospective adviser what standard they are qualified to and also whether they expect to be qualified beyond 2013. If you don’t, you may have a very short relationship with your new adviser!
Commission and Advice Costs
For new financial products which commence after 31/12/2012 provider commission will cease (with a small number of exceptions).
This should result in the cost of owning a financial product decreasing as a result of the commission associated costs being removed.
Where advice is taken, the cost of this advice will be clearly identified as a transparent cost. We feel that this is a positive step as it reduces the risk of any conflict of interest in the advice process, such as product bias based on high levels of commission.
Kelvin Financial Planning already work on an ‘RDR friendly’ basis and a breakdown of the costs for our services is available here. However, for many other organisations and their clients, the impact of this policy is already being felt. Royal Bank of Scotland have recently made 600 staff from their financial planning division redundant citing the challanges of moving to a transparent fee based environment in Jan 2013. Sources claim this is around half of the staff in that department.
I expect that customers of this department will continue to pay the same level of charges for their investments irrespective of how many staff members RBS employ. At this stage it is unclear how these customers will be serviced with such a reduction in staffing levels.
If you are an RBS customer concerned about the level of ongoing service you expect to receive from your financial planning manager then compare the service you do receive or expect to receive against our client service options.
Please feel free to contact our firm to see what we can do for you. Also, if you are an existing client and are aware of family or friends in this situation we would like your help in recruiting these clients.