You get what you pay for

28th September 2012

Why independent advice is changing with the introduction of the RDR*

If you’ve ever used an independent financial adviser you need to know that, from 1st January 2013, the way you pay your IFA is changing.  It’s important to know why - and what it means for all your investments and savings.

The New Year heralds a new dawn for British investors.  From 1st January, anybody wanting to provide truly independent financial advice must have higher qualifications and change the way they charge you, the investor, for their services.

Until recently, many advisers were paid by commission.  In return for a fee paid to the adviser, by the investment fund, pension fund or other product they recommended, it may have seemed as though you got your advice for free.

That system is now changing.  You will now have to pay a fee yourself; either hourly, as you would pay an accountant or solicitor,  or where your adviser charges you a fixed fee, or a percentage of the investments you have.  Independent Financial Advisers (IFAs) will no longer receive commission from the companies whose products they sell.

Why?  That’s easy.  The financial regulators were worried that commission payments were affecting advice.  Companies who pay the most commission might have been getting more business.  Those who pay less, or none at all, might have suffered as a result.

The thinking makes sense.  Most savings accounts, along with investment trusts and Exchange Traded Products, generally do not pay commission.  In a lot of cases they do not get recommended much either, or constantly monitored to ensure they are still right for you.

So what does it mean for you?  For a start, you will be able to see more clearly how much your independent advice is costing you.  That should make it easier for you to see what value for money you are getting.  Cheap advice won’t necessarily be better.  As they say, you get what you pay for.

Fingers crossed, you should also see your adviser offering a wider range of products.  Indeed, IFAs will have to prove they are ‘whole of market’ if they want to keep their independent status.

If your adviser has not spoken to you about the changes - called the Retail Distribution Review - it is worth asking for a chat.  You need to know what service you will get from January 2013 and how much it will cost.

Many advisers have already switched to fees, so their clients already pay by the hour or similar method.

You might want to ask about your savings accounts too.  After all, they are the cornerstone of any investment portfolio.  Rainy day money is just as important as those long term investment funds and pensions - more so if you are in retirement.  And it is always good to get advice about important things. But before you pay a fee for advice on savings, check out our Rate Tracker Concierge service.

We think that many IFAs will be interested in getting some outside help too.  After all, our team spends all day (and often nights and weekends) keeping up with ever-changing savings rates and deals. Our regular Rate Alerts, and frequently changing best buy tables, are testament to this.

If you want to stay on the best rates always, then register with our free Rate Tracker service and we will do the hard work of keeping you ahead of the Best Buys today, tomorrow and forever.

Our Rate Tracker Concierge Service goes one step further for investors with more than £100,000 in savings.  We can look after the lot and make sure your money is both in the best savings products, earning the best rates, and gets maximum compensation protection under the Financial Services Compensation Scheme.  As our fans have told us, return of capital is just as important as return on capital!

There is a small cost for this service but our subscribers tell us the benefit is massive - "They take away the ghastly business of working out the best savings deals; they do as much of the paperwork as possible: and they just get things done..." Mrs H from Berkshire.

If you or your adviser would like to know more, call us on 0800 321 3581 or email us here.  We are always ready to help!

* Retail Distribution Review

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