How RDR will impact the everyday investor

Most of what’s written about RDR is for financial advisers, many who have had to significantly change their business models to fit in with the new regulations that have come into force today.

However, the average person on the street with investments in a pension or an ISA may not have even heard of RDR, let alone know how the changes will impact their annual payments.

Here, the Financial Services Authority (FSA) outlines the three changes which will directly impact – and hopefully benefit – the everyday investor:


Know how much advice costs

“Advice has never been free. You may not have realised but if you received financial advice before our changes cam ein you probably paid ‘commission’ to your adviser.”

"This generally came from the company providing the product paying your adviser a percentage of the sum you invested."

"Instead of you paying commission on new investments your financial adviser now has to be clear about the cost of advice and together you will agree how you will pay for it."

"This way you know exactly what you are paying and that the advice you receive is not influenced by how much your adviser could earn from your investment. This will help you to shop around and compare the true cost of advice."

"Your adviser now has to clearly explain how much advice costs and together you will agree how you will pay for it. This could be a set fee paid upfront or you may be able to agree with your adviser that they can take the fee from the sum you invest."


Know what you are paying for

While many advisers are remaining independent, some have changed their business models so that they only give “restricted” advice.

“Financial advisers that provide ‘independent’ advice can consider all types of investment products that might be suitable for you. They can also consider products from all firms across the market.”

"An adviser that has chosen to offer ‘restricted’ advice can only consider certain products, product providers or both."

"Your adviser now has to clearly explain to you whether they offer one or the other."


Get improved professional standards

"Some investments can be hard to understand. So we have increased the minimum professional standards of qualification that financial advisers have to meet to ensure their knowledge is up to date."

"Financial advisers also have to sign an agreement to treat you fairly."


What should you do now?

"Next time you see your adviser you should ask how much you have been paying for their advice and how much that same advice now costs."

"They should also be able to explain how the changes to the way you get and pay for financial advice affect you, and whether they offer independent or restricted advice."


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