Question
I understand that the rules regarding commission on financial investments are due to change in 2013. Have the new rules been published yet, or whether there has been any agreement as to how the new rules will apply.
Is it likely that existing arrangements for trail commission will have to be changed, or will previous arrangements continue as before?Answer
The new rules are the result of the FSA's so-called Retail Distribution Review (RDR), the aim of which is to give customers a fairer deal.
While still a work in progress, the main proposals/rules so far are:
All in all RDR should be a positive step forwards for consumers. They'll just need to adjust to the concept of explicitly paying for financial advice rather than continue with the misguided belief that financial advice is 'free' because it's paid by commissions - they couldn't be more wrong!
You can read more details in my article here.
I understand that the rules regarding commission on financial investments are due to change in 2013. Have the new rules been published yet, or whether there has been any agreement as to how the new rules will apply.
Is it likely that existing arrangements for trail commission will have to be changed, or will previous arrangements continue as before?Answer
The new rules are the result of the FSA's so-called Retail Distribution Review (RDR), the aim of which is to give customers a fairer deal.
While still a work in progress, the main proposals/rules so far are:
- Product providers will no longer be allowed to build sales commission into the price of their product, hence commission will effectively be abolished. Financial advisers will be able to add their fees onto the cost of the product, very similar to commission, but the customer will have to agree this beforehand. However it seems commission will be allowed to remain for non-advised sales, e.g. when you decide to buy a fund via a discount broker. And commission paid on existing investments will be unaffected.
- Financial advisers who charge an ongoing fee must state how much this is and what they'll provide in return.
- Advisers will only be able to call themselves independent if they can advise on the full range of products suitable for you, else they'll be called 'restricted'.
- Advisers who sell their own funds (e.g. Towry) will no longer be able to call themselves independent unless they can show their funds have been considered alongside all others in the market and is most suitable for the client.
- Advisers will need to attain a higher overall level of qualifications than in the past.
- Fund platforms/supermarkets must allow investments to be transferred 'as is' between each other. And they'll the to disclose the fees they receive from fund providers.
All in all RDR should be a positive step forwards for consumers. They'll just need to adjust to the concept of explicitly paying for financial advice rather than continue with the misguided belief that financial advice is 'free' because it's paid by commissions - they couldn't be more wrong!
You can read more details in my article here.
Read this Q and A at http://www.candidmoney.com/questions/question501.aspx
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