FinanceBAM News

Mark Atherton wrote an interesting article in the June 27, 2007 edition of Times Online. In it he explained that the Financial Services Authority (FSA) announced plans for a massive shake-up of the financial industry. Critics say that it still has not gone far enough.

In its Retail Distribution Review, the FSA has put forward plans which, were drawn up the industry itself, designed to make the actual cost of financial advice much more clear and distinguish it from the cost of financial products.

It is proposing a tiered structure for financial advice with advisers falling into the category of one of the tiers. The advisers on the top tier would be able to advise on anything from savings accounts to investment trusts. A second tier would include those who could give primary, simple advice at a lower cost such as banks, insurers, some existing financial advisers.

In the top tier there would be a distinction between professional financial planners who would charge a fee and be independent and general financial advisers who would continue to receive a fee but would not be considered independent.

But Patrick Connelly, of Towry Law and a fee-based adviser said, “The review has not drawn a clear enough distinction between fee-based and commission-based advisers. Under the proposals, some advisers who receive commission would be able to call themselves fee-based, provided that they agreed these payments with the customer. We think this is a dilution of genuine fee-based advice. Advisers that are paid commission have to sell products in order to get paid and this could lead to a conflict of interest between what is good for the adviser and what is good for the client.”

Other advisers have disagreed saying that this new structure would give consumers a much more clear idea of what they were getting when they came to pay for financial advice.

The FSA is now accepting comments on the new structure planned for the next six months.