You may have seen in the media there are changes on the way in the financial advice sector.  We have created a brief overview of the main changes you will see.

The advice sector is changing to improve the professionalism, integrity and credibility of financial advisers.  These changes are part of the Retail Distribution Review, which has been established as part of the Financial Services Authority (FSA) consumer protection strategy.  These new rules come in to play on 1 January 2013 and the three main changes you will see are:

Your adviser
There can be a number of reasons for wanting to see an adviser, whether it be a general review of your finances or specific assistance with one area.  From next year advisers will be required to clearly state the type of advice they are offering to be either, independent, restricted, simplified or basic. This is important for you to know as the adviser may have limitations to the products or services they can advise on or offer to you.

• Independent advice - the adviser can provide advice on products and services from the whole of the market and will need to provide 'unbiased and unrestricted' advice based on a 'comprehensive and fair' analysis of the market.
• Restricted advice - the adviser can provide advice on a limited range of services or products.  For example, the adviser may offer advice across all product areas but source products from only a few providers or they may offer products from providers across the whole of the market but only advise on limited product areas, such as a pension or a mortgage.

Both independent and restricted advisers will have to be qualified to a new minimum level and they will also need to hold a certificate confirming their attainment of the necessary qualifications and 'continuing professional development' (CPD).

Your adviser's qualifications
Advisers will be required to achieve a higher minimum level of qualifications than previously to be able to provide you with advice.  Qualifications and Credit Framework (QCF) Level 4 will be the minimum qualification level and is the equivalent of components in a degree.  IFAs will also have to complete 35 hours of CPD each year and sign up to a code of ethics.  Advisers meeting all these requirements will be granted a Statement of Professional Standing (SPS), which will be renewed every year.  Consumers looking for an adviser on our search engine will still be able to find advisers holding qualifications relevant to particular advice areas.

The way you pay for advice  
In the past financial advisers may have been paid via commission from product providers.  After 31 December 2012 advisers will not be allowed to receive commission for the sale of retail investments and pensions.  IFAs will be required to disclose their charges upfront, and the cost of the work to be undertaken will be agreed between adviser and client before the advice process starts.  The increased transparency of the cost of advice will enable you to fully understand what services you will receive and for what cost, enabling you to shop around.

A common misconception is the idea of ’free advice’.  You should be aware that financial advice, from whatever source, has never been free – even if you have not been sent a bill for the advice, you will have paid for it somewhere along the line, such as through charges on your investment.  Financial advisers may provide an initial consultation at their own expense and you can use this meeting as an opportunity to discuss their firm’s services and charges.  Under the new rules charges for advice given when the product was sold to you can still be taken from investment products if you choose, but ongoing charges taken out of your investment will only be allowed if your adviser provides an ongoing service on your investment.

The FSA has put together a simple factsheet to provide more information on the changes to the way you get financial advice.

Unbiased.co.uk can help you find an IFA.  Simply enter your full postcode into the search bar for a list of your nearest IFAs.

Some of the questions you may wish to ask your IFA...

How does this impact my current financial advice arrangement?

What services do you provide?

What are the annual or ongoing charges for the services you provide?

How will you be charging me for your financial advice services?

Can you help me understand the why the changes have been introduced?