Financial advice rules set to change for the first time in 16 years
• New “depolarisation” rules from 1st December
• New Key Facts information to set out exactly what financial advice costs and the companies the adviser can select from
• Independent Financial Advice still widely available across the UK
“Reports of the imminent demise of independent financial advice have been greatly exaggerated” says IFA Promotion
The two main changes are:
* Multi-tied adviser – The current system allows two types of financial adviser; independent (who advise on all products in the market) and tied (who can only advise on products from one company). Under the new rules a new type of adviser – “multi-tied” – is created. The multi-tied adviser will offer consumers the choice of products from a limited range of companies they have selected.
* ‘Keyfacts’ information – Under the new rules 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 properly understand the value and cost of the adviser’s proposition, and to shop around for the best type of advice for them.
The new rules, known as “depolarisation” come into force from 1st December 2004, with a six month grace period for companies to comply. Over this period some tied agents (such as some banks and building societies) are expected to become multi-tied, as are some advisers who are currently independent. With these changes comes the added risk of increased consumer confusion, making it a more important time than ever to highlight how the advice process works and help consumers to decide what is the right type of advice for them, warns IFA Promotion.
Commenting on the forthcoming changes, David Elms, Chief Executive of IFA Promotion said, “Many people are unclear about where to get financial advice from. Whilst these changes will give consumers better information at the beginning of the advice process – for example on the cost of advice – there is a risk that more types of adviser will add to confusion.”
“Reports of the imminent demise of independent financial advice have been greatly exaggerated. Despite the forthcoming changes, we expect the independent advice sector to prosper as consumers continue to value and demand the services of an IFA – the only type of adviser that gives advice based on all the products on the market.”
Elms concluded, “We want to be central to the education process, since experience tells us that when the choices are explained, consumers recognise the value of independent financial advice. With the introduction of a third type of adviser, 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.”