5th June 2014
The Government backed Money Advice Service (MAS) has launched a salvo to make it easier for consumers to get better independent financial advice as they approach retirement and beyond.
A review by MAS found that customers often find it a confusing and fragmented process to find an adviser, and is now hoping to create a new specialist retirement directory which would help people obtain the right advice, at the right time, and at the right price.
The review also acknowledged that the changes to pensions from April 2015, announced in the Budget, make it even more important for consumers to be able to access a high quality specialist adviser easily when they need it.
The Service proposes that the directory would include advisers who specialise in retirement advice. It would be unbiased and non-commercial, and would list only those advisers who offer advice to all individuals irrespective of the size of their pension pots. It would also allow consumers to search for an adviser by postcode, and compare the costs, specialisms, and qualifications of advisers to help them make a more informed decision.
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Advisers would not have to pay to be in the directory and will benefit from receiving customers who understand the value of regulated advice. However they will need to satisfy some specified criteria, which will be agreed by an independent panel of industry and consumer representatives.
Caroline Rookes, CEO at the Money Advice Service, says: “Many people are faced with making complex financial decisions as they approach retirement, and it is crucial that they know where to turn for specialist advice, particularly following the changes to pensions from April 2015.
“The directory we are proposing today will help people find the adviser that is right for their needs. It will also make it much easier for people to move from the free and impartial guidance we provide to help people understand their options at retirement, to specialist advice on what product to choose.”
The state of financial advice now
The start of 2013 ushered in one the biggest overhauls the UK’s retail financial services industry has ever witnessed. Dubbed the Retail Distribution Review (RDR), the new regulations were designed with the aim of making the price tag for investing and getting financial advice much more open and clear.
The goal was to ensure that consumers have the information needed to make informed decisions, and are clear on the costs and services of advisory firms.
READ MORE: The fund charges shake-up – the key points
Previously there was a perception among many investors that financial advice was free, as intermediaries earned a living from the commission providers such as pension firms and fund managers paid them.
But the RDR has banned this practice, as some of the less ethical financial advisers in the market were biasing their funds and pension recommendations towards those providers paying the highest commission.
Are you seeking independent financial advice?
It is worth remembering that despite the misselling scandals that have sullied the profession, there are plenty of good IFAs out there. Many advisers worth their salt will also be happy to have an initial consultation with you free of charge. Visit www.unbiased.co.uk to find an independent financial adviser in your area suitable for your needs.
What are the costs?
Under the new rules, advisers can either charge by the hour or via a percentage fee. Check what suits you better. Paying by the hour could be expensive if your needs are relatively simple, as the average rate is circa £150 for 60 minutes. Tell your adviser what you want to achieve and work out the best and most appropriate deal for your needs.
How much service should I get?
One thing advisers have been accused of in the past is recommending a set of investments to a customer, pocketing the commission from the fund provider and providing little to zero on-going service. Ask what level of service and attention you can expect. Set out your goals; is it saving for your children or for your retirement? Look at what sort of timeline you wish to achieve them in. Ask your adviser how often they will review your circumstances with you. The adviser should provide a realistic time horizon during which they are achievable, what level of service is likely to be required and what the likely costs are going to be.
Are they actually fully independent?
Post the introduction of the RDR, advisers must declare whether they are either ‘independent’ or ‘restricted’. Independent financial advisers are able to recommend products from across the market from any provider but restricted advisers have a limited selection of products they can offer from a limited set of providers. Experts recommend seeking out an independent adviser but if your adviser is tied to only a number of providers, ask them whether they can meet all your needs when they have a smaller selection of tools and funds at their disposal.
How experienced is your adviser?
Another goal of the new rules was to raise professional standards among financial advisers. Ask them what level of qualifications they have achieved. Do not be afraid to ask what they have done for others in your circumstances, it should at least give you a general benchmark of what to expect. It is worth remembering that many advisers prefer a holistic approach to financial planning, they may not be investment experts, and may even outsource that service to another group. Ensure you know exactly where you stand in terms of what they are offering.
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