Updated 03 December 2020
Misreporting about the retail distribution review has led some people to think that financial advice used to be free and now isnât. What it actually means is a much more transparent fee structure, writes Scott Gallacher.
Since the beginning of the year there has been much talk about the âdeath of free adviceâ â supposedly brought about by the new regulations in the Retail Distribution Review (RDR).
Itâs true that financial advisers have traditionally received commissions instead of fees but that doesnât mean that financial advice was free and now isnât. Â Whether itâs by way of a commission or fees, any professionalâs costs always come ultimately from their client.Â From a clientâs point of view, all thatâs really changed is that the fees are now set out much more clearly and are not hidden away in the small print.
That said, most financial advisers, and indeed many other professionals, have always provided an element of free advice. This could be solving small queries or problems or simply pointing them in the right direction. This has always been part of what advisers do, andÂ the RDR doesnât necessarily change that. Â Whatâs simple and quick for us can often be a real help to you and we know how much you value this kind of service.
So please donât let the misreporting of the RDR stop you calling your adviser with your queries. If itâs a simply query you might not even be charged or you could find the cost is already covered under any ongoing charges or commission payments.
If your adviser does ask you to pay for advice; the value of that advice should more than outweigh the cost as itâs easy for you to make a costly mistake, even when dealing with apparently simple financial matters.
I recently read about the case of Mr Joost Lobler, who is unfortunately facing bankruptcy due to having to pay tax of around Â£350,000 on a profit of approximately Â£45,000! The reason is simply that when making an investment withdrawal there were two tick-boxesâ¦ and he ticked the wrong one.
Fortunately it doesnât often go as catastrophically wrong as it did for Mr Lobler, but even on a smaller scale, Iâd hate for anyone to make a costly mistake when they could just call a professional adviser.