In the past financial advisers may have been paid via commission from product providers. Since 31 December 2012 advisers are not allowed to receive commission on the sale of retail investments and pensions. Advisers are 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 should help 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. Use our adviser checklist to help you understand the service your adviser offers and at what cost.
The FCA has put together a simple factsheet to provide more information on the changes to the way you get financial advice.