The Financial Services Authority (FSA), which is the Government’s financial services watchdog, is informing everyone that the advice given to us by finance providers, including banks is changing. You can read about the changes to financial advice here.
Making decisions about mortgages, pensions and savings is tough enough and we must have complete trust in the advice we get. However, many people have been let down and this is why FSA’s financial advice is changing.
The changes being brought in by them will help you better understand what you’re paying for and to have more confidence in the people advising you.
From 31 December 2012 they are making three key improvements to how you get financial advice.
1. You will know how much financial advice will cost you
Advice has never been for free. You would have been paying for advice that you received from your adviser, through a process known as “commission”, this is where your adviser was paid by the company which provided the investment you bought. We believe this encouraged advisers to recommend products based on what they could earn rather than what’s truly best for you.
So, from 31 December 2012 you will now agree a fee directly with your financial adviser upfront. Therefore, you will know exactly what you are paying for, where your money is going and also that the advice is not being influenced by how much your adviser could potentially earn.
2. You will know exactly what you are paying for
Your adviser will have to explain to you what type of advice they providing you, be it ‘independent’ or ‘restricted’. Advisers who provide independent advice will be able to advise on all investment options that may meet your needs. Advisers who choose not to do this will be offering restricted advice – this is where they are restricted by the companies they can offer you investments with, the product type, or both.
3. Improved professional standards
Investments can be tricky things for us all to understand. So we need those who help us to have the necessary skills. Therefore, we are making financial advisers meet higher professional standards, keeping their knowledge up to date so that they are aware of latest developments in the marketplace for you and sign an agreement requiring them to treat you fairly.
They will be monitoring firms to make sure they keep to these new standards.
They have published a guide to help explain these changes to you. It is free and available to download from the FSA website. Or you can call our Consumer Helpline to order your free copy on 0845 606 1234.