While Lifetime, with our commitment to client service of paramount importance, were always ready for the advent of the Retail Distribution Review (RDR), it appears that a number of other financial advisory firms were not.
According to a review carried out by the Financial Conduct Authority, three-quarters of financial advisers fail to give required information about the cost of advice.
The new RDR rules were introduced at the start of 2013 – and designed to end the system of commission payments. Instead the reforms promised:
- Clearer charges: instead of being paid by commission, advisers will have to agree charges up front.
- Clearer services: it will be made clear how much of the market an adviser can help with.
- More professional advice: an adviser will have to meet higher standards of qualification, keep knowledge up to date and sign up to an ethical code requiring them to treat a client fairly.
Those changes were ‘manna from heaven’ for us here at Lifetime. That’s because we have already been following that path for many years. We practice what we preach:
- Service, Service, Service
- Inspiring trust
- Building strong, lifetime relationships
But it appears that many other firms are not delivering the same quality of service.
The FCA said its latest review of the sector was “disappointing”.
It said two firms were facing enforcement action for particularly severe failures, while the results should be a “wake-up call” for the rest of the industry.
The latest FCA review of the rules found:
- 58% of firms failed to give clear, up-front information on the cost of advice
- 50% of advisers did not give clear confirmation of how much advice would cost individual customers
- 58% did not explain extra details about charges, such as their potential to fluctuate
- 31% of firms selling only a restricted range of products from certain providers did not make this clear
- 34% of firms did not give a clear explanation about the service they offered for a fee and customers’ right to cancel
Wealth managers and private banks were the worst offenders, the FCA said. Some customers could have been misled as a result, it added.
“While we have seen a lot of positive progress and willingness by advisors to adapt to the new environment, I am disappointed with the results of our latest review,” said Clive Adamson, director of supervision at the FCA.
“These results are a wake-up call and we expect the industry to respond.”