Trust...and why this change is good for all

Within the financial advice profession there has been an ongoing issue for a number of years.  Due to the behaviour of, in my opinion, a number of unethical advisers, the public has lost trust in financial advisers.  Actually the majority of financial advisers are highly ethical individuals who take the commitment to enhance their clients financial situation incredibly seriously.  However, and apologies for the mixed metaphor, it doesn't take too many "bad apple" financial advisers to tar all the good guys with the same brush.

This loss of trust hasn't benefited anyone.  It's been detrimental for the professional and highly ethical advisers who have had to work harder to overcome this issue and build a relationship of trust with it's clients and It's been detrimental for the public, with less people focussing on the long term and saving for their future financial goals and many not contributing to ensuring they have a sufficient income to live the life in retirement they desire.  However one thing you can be certain of, especially in the profession I have chosen, is change.  In my opinion, any change which works towards ensuring that this trust is being rebuilt is a positive move.

Within financial service there are a number of positive changes which will impact all individuals and businesses who engage the service of a financial adviser.  These changes have been detailed here in this recent document from the FSA.  It's been a change we've talked about with our clients and prospective clients for a while now.  So, how do these changes potentially impact you?

The changes (called within our profession RDR) should provide all clients of financial advisers with a number of clear benefits.  Firstly clarity.  When the changes occur (from the 31st December 2012) commission on investment and pension products will no longer exist.  Let's be clear, previously clients of financial advisers regardless of whether they paid via a fee or commission ALWAYS paid for the advice.  If a client paid via commission then, generally speaking, the charges of the product taken we're higher than if there was no commission paid to the adviser.  

There was a perception from many clients that this advice was "free" as it was paid for by the product provider paying the adviser a commission, however this was incorrect.  The changes happening should work towards clarifying this issue and clear the muddy waters of how advice is paid for and that's got to be a good thing for both the professional adviser and you as the client.

The second benefit is expertise.  The minimum qualifications to become a financial adviser have increased.  This means far more qualified advisers who are more likely to have the technical expertise to help you both now and in the long term.  The commitment for advisers to continue to learn and develop has also increased and this benefits you as it means that your adviser needs to make a clear commitment that they continue to understand the changes in our business which may impact you as a client.  

Whilst the majority of financial advisers have either achieved these standards or are on track to, there is a significant minority of financial advisers who won't.  So, how do you know you are dealing with an adviser who is ready for these changes?  The answer is simple, before you next take advice with a financial planner understand the upcoming changes and ask more questions!  Take a look at the FSA Factsheet, print this out and next time you are meeting with your existing financial adviser (or looking for a new adviser) ensure that that you ask the right questions to confirm they are ready for these changes.