The two main changes are:
- Multi-tied adviser - Under the new rules a third type of "multi-tied" adviser is added to the existing choice of "tied" (to one product provider) or independent financial adviser ("IFA"). The multi-tied adviser will offer a choice of products from a limited range of companies they have selected.
- ‘Keyfacts’ information - All advisers will have to provide customers with two ‘Keyfacts’ documents, explaining their status, the services they offer and a menu of their charges – to enable consumers to understand properly the value and cost of the adviser’s services, and to shop around for the best type of advice for their needs. Only IFAs are required to offer customers a fee-payment option, although other advisers may choose to.
David Elms, Chief Executive of IFA Promotion, said, "The FSA is introducing new cost and status disclosure requirements, which will enable people to shop around and properly assess the value on offer from different advice types. Over time, advisers having to explain the value of their service should convince more and more people to pay for advice by fee, an option which all IFAs must offer their customers from June 1st."
"However, with any major rule change comes room for confusion, so we are urging people to make sure they understand the type of advice they are receiving, and to ask questions if they are at all unsure."
The implementation of these new rules follows a six month transition period, to allow advice firms to alter their business models, systems and marketing material. However, despite initial industry fears of a flight away from independence, IFA Promotion – which represents the vast majority of UK IFA firms – reports that over 80% of member firms have chosen to remain independent.
Elms continues, "The vast majority of IFAs have chosen to remain independent, and thus able to advise impartially and make recommendations based on all the products on the market. In addition, we’ve seen a marked increase in the number of IFAs reporting advanced qualifications, which suggests that IFAs intend to differentiate their services on the basis of quality and professionalism. This can only be positive news for people taking independent advice, and for the financial services industry, as the IFA-client relationship becomes increasingly based on holistic, long-term financial planning."
Elms concludes, "With the introduction of a third type of adviser, and firms offering different advice models for different product types, it has never been a more important time to relay to consumers the benefits of seeking whole of market, independent financial advice, and most importantly, how to find it."
The website can be found at www.unbiased.co.uk/beadvised
