by Mark Johnston
Financial Advice in 2013.
It seems that many borrowers trust that they will be given the right advice according to their individual needs and attitudes to risk, but this has not always been the case.
Given the current economic climate, financial advice has never been more important.
Therefore over the past few years the Financial Services Authority (FSA) has been looking in to this part of the market. The regulator has been investigating the services of banks, financial advisers and building societies to name a few, in order to see how they give advice on financial products and how they sell financial policies.
This has lead the Financial Services Authority (FSA) to introduce the Retail Distribution Review (RDR) which has brought in new rules that the industry must abide by and must have put in place by the end of 2012.
Basically these new rules mean that by the end of 2012 financial advisers will have to be much clearer about the type of advice the give and they will also have to follow new rules on how much they charge.
Advisers will have to be clear whether they are providing independent or restricted advice.
Previously when looking for financial advice consumers had three options:
– Independent financial advice, which is the only type of advise that can look at all products across the marketplace. Therefore offering truly unbiased advice.
– Tied advice, which is advice about products provided by one provider.
– Multi-tied advice, which is advice about products of a limited selection of providers.
Experts believe that that these new rules will ‘put the consumer back in the driving seat’.
It is possible that from 2013 some banks and building societies that currently offer financial advice will switch to offering an ‘information only’ service.
Also from January 2013 financial advisers will no longer be able to take a commission as a form of remuneration and instead they will have to quote a fee for advice given
Some firms may opt to charge an hourly rate and recent research from Deloitte, the consulting and financial advisory firm suggests that hourly fees for advice could be around £105.
Another study from Aviva, the insurance provider, found that the hourly charge was more likely to be between £100 and £150, however private banks dealing with high net worth clients could charge up to £500 an hour.
However, some industry experts believe that forcing a profitable industry such as this to be more upfront about how much money it takes from customers is never going to be easy and there are worries that some firms are already trying to find a way around the rules.
The Association of Mortgage Intermediaries (AMI) expects adviser mortgage market share to rise from £70 billion to around £82 billion in 2013, driven by favourable factors supporting the advice and mortgage sectors in 2013.
Robert Sinclair, chief executive officer of the Association of Mortgage Intermediaries (AMI), believes that “the road ahead is about better and better”.
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