Depolarisation comes into force

The new rules formed part of the official start of depolarisation which enables the industry to be more flexible in providing advice to customers and to offer a wide range of products.

The introduction of new documents, including a ‘menu’ of commission rates, are aimed at helping consumers shop around for investment products and assess whether their adviser is providing value for money.

Financial advisers must provide two Key Facts documents entitled ‘About Our Services’ and ‘About the Cost of Our Services.’

Dan Waters, director of retail policy at the FSA, said: “These Key Facts documents will make it clearer to consumers that even when finan-ced through commission, advice comes at a cost – and it is consumers who ultimately pay through the charges levied on products they buy.”

He said the initiative would result in increased pressure on commission levels and a need for firms to clearly explain services.

The ‘menu’ of commission rates will for the first time provide a benchmark showing the average cost of advice. Also, under the new rules, advisers can offer ‘multi-tied advice’ using a panel of providers.

In addition advisers who are independent will have to offer consumers the option to pay for advice by a fee rather than commission.

After 1 June the FSA will be checking that firms make a serious attempt to comply and will take action against those that do not. Changes in the market will be monitored on an ongoing basis and a formal review will take place after two years.

More information and examples of Key Facts documents are available on the FSA consumer website at www.fsa.gov.uk/consumer.