The new regulations removed the artificial restrictions of the old system of ‘polarisation’, increasing the range of products available to consumers as well as giving them a clearer picture of what they are paying for when given advice.
The previous system allowed two types of adviser, independent (all market products) and tied (only advise on products from one company).
The new rules create room for a ‘multi-tied’ adviser offering consumers a choice of products from a limited range of selected companies.
The FSA claims consumers will get clearer information and will receive an indication upfront of the costs of the services on two ‘keyfacts’ documents.
The first tells consumers the type of advice and range of products on offer. The second tells the consumer about the different payment options on offer, indicates what the costs will be and provides information on how the commission cost compares to the market average commission for each product.
Dan Waters, FSA director of retail policy, said: “This is a groundbreaking initiative which will encourage competition and innovation.
“By providing this information at the start of the advice process, it will be easier for consumers to shop around and get the best value for their money.”
David Elms, chief executive of Independent Financial Adviser Promotion, said: “While these changes will give consumers better information at the beginning of the advice process there is a risk that more types of adviser will add to confusion.”
Alan Dring, head of sales at Standard Life Bank, said: “Whatever direction they take, advisers must have appropriate plans in place to react to market change and ensure they are able to produce a reliable income stream.
“Traditional sales-orientated models are outdated and will not give advisers the long-term profitability they need.”
