At present, paying for financial advice can be more than a little perplexing. As it stands, the majority of advice is paid for through a commission, this means that whilst it may appear that the advice is free, it isn’t. This puzzling situation can arise because there is no need to part with any money up front when getting your finances reviewed, and what will be paid in the future can sometimes be obscured by complex and confusing product charges.
This has all changed, as from January 1, 2013 financial regulators introduced a new regulation which simplifies the way financial advice is paid for. The rules have been brought in to make it clearer for clients to see exactly what they are paying, however, this may mean laying out a larger upfront sum. These changes are part of the Retail Distribution Review (RDR), a consumer protection strategy that has been set up to establish a retail investment market in which consumers will have confidence through a time when they need more help than ever, whether you are looking to insure your practice or preparing for retirement.
Usually a financial adviser will give you the option of paying upfront or allowing you to pay over time via a commission, the latter option is no longer available. The Financial Services Authority (FSA) has bought in this initiative as a way of making the way which financial advice is paid for more transparent. The FSA believes that this will allow the client to have greater trust in the advice they receive because they will know exactly what it is costing them and that the adviser is recommending a product for the right reasons.
As well as this review of the way in which financial advice is paid for, the RDR is initiating another significant rule which states that it will be mandatory for all advisers wanting to practice as an Independent Financial Adviser (IFA) to acquire diplomas in financial planning from the Chartered Insurance Institute. Attaining this qualification will be verification that the adviser is well acquainted with every kind of financial product that they offer.
Currently there are a whole assortment of financial advisers for dentists to choose from, ranging from wealth managers to bank advisers, so it can be hard to know who knows what. To add further confusion, across this spectrum, financial qualifications can vary tremendously. The RDR hopes that establishing this minimum qualification will assure clients that they are receiving intelligent, well thought out and reliable advice. Should a financial adviser not meet the criteria they will be regarded as a ‘restricted adviser’ and will only be able to sell one company’s products.
Despite all of these changes the FSA has agreed that some advice can still be given on the older system, but this advice will be simpler and will have to focus on the immediate needs of the client rather than the whole financial picture. It is, as yet, unclear how many advisers will be offering this service.
With these new rules coming in some may question whether it is still worth having a financial adviser. Well, there are times when having access to experienced financial knowledge will be invaluable, similar to patients seeing a dentist. Some IFAs specialise in offering financial advice to dentists and can offer independent advice on everything from income protection to mortgages, and investment advice to pension analysis. Though these new regulations may cause some to pay a little more, financial know-how will always be indispensible when considering your own financial future.
Now dentists can look forward to a far more transparent way of doing business with financial advisers. Though the new regulations will of course incur more costs up front, dentists can be sure that they will avoid any hidden charges down the road and be safe in the knowledge that their financial interests are in the hands of qualified and reliable professionals.