U.K. financial advisers won’t be able to charge commissions on some products under new rules designed to make the fees paid by consumers more transparent.
Under the Financial Services Authority’s Retail Distribution Review, which takes effect today, advisers will charge clients hourly fees for counsel on investments and be subject to tougher standards for training and accreditation.
“These changes are about making the cost of advice clearer, where else would you buy something without knowing in advance how much it costs?” Linda Woodall, head of investment intermediaries at the FSA, said in an e-mailed statement. “Customers will now know how much advice is costing them, the service that they are receiving and be reassured that their adviser is qualified.”
The FSA says the new rules will reduce mis-selling and build consumer confidence after faith in the industry was shaken by a number of scandals linked to improper sales of some products. U.K. banks are repaying billions of pounds to customers who were wrongly sold payment-protection insurance.
Financial advisers will have to clearly describe their services as independent or restricted, the FSA said.
Independent advisers will be able to consider all types of retail investment products which could meet the customer’s needs and consider items from all firms across the market.
A restricted adviser will only be able to recommend certain products, providers, or both, meaning they might only offer items from one company, or just one type of product.
The RDR was one of the regulator’s top priorities before the financial crisis in 2008 and the banking system was bailed out by the government.