Retail Distribution Review

RDR - or the Retail Distribution Review

What does it mean for you?

Since 31 December 2012 the financial advice sector has changed to improve the professionalism, integrity and credibility of financial advisers.  The changes are part of the Retail Distribution Review, established as part of the FCA’s consumer protection strategy.  You will notice changes to what financial advisers call themselves, the qualifications they must hold and how you will pay for their services.

Your adviser

Advisers must now clearly state the type of advice they are offering to be one of the following - independent, restricted, simplified or basic.  It’s important for you to know this as the adviser may have limitations to the products or services they can advise on or offer to you.  On this site we only list IFAs (independent financial advisers) and restricted whole of market advisers – as these advisers will be able to advise on the whole market for the areas of advice they offer.  We don’t list advisers who are restricted by product provider, as these advisers will only be able to offer advice on products from some providers meaning there is a chance you won’t be told about a product that would have been best for your needs.  Both adviser types are clearly labelled on their listings and profiles.

  • 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.  On this site, we only list restricted advisers who cover the whole of the market for the advice areas they offer.

Your adviser's qualifications

Advisers are required to achieve a higher minimum level of qualifications, now up to QCF Level 4.  They also have to complete 35 hours of training 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 can also find advisers holding additional qualifications relevant to particular advice areas as well as accreditations such as Certified Financial Planners and Chartered financial Planning firms.

The way you pay for advice

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.