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The RDR – What is it?

Much has been made in 2012 about the impending changes to financial advice, which will be brought about by the introduction of the RDR on 31 December. With just over two months to go now before the Retail Distribution Review is brought into effect, there are still many people who will be confused by what it actually is.

The RDR is essentially a measure brought in by the Financial Services Authority (FSA) who governs the financial advice industry. The main aim of the review is to ensure consumers who seek advice are getting the best possible help for their unique situation, by banning advisers claiming commission on certain financial sales they have referred.

Advisers traditionally work with a number of financial services with which they have an agreement to promote their products, in return for commission on any leads that turn into a sale. According to the FSA, this makes for a lower standard of financial advice because the products available to a consumer are limited.

So in effect the RDR seeks to open up the market to the consumer, giving them more options; but there is a catch. Where once the consumer would be able to obtain the advice for free, while the adviser is paid though commission, the consumer will now be charged for the advice, as the commission is no longer available. The rates are yet to be confirmed, but many expect charges in the region of £250-£300 per hour for advice, which could potentially severely limit access to an adviser for many.

It is a simple concept, but one that is likely to send shockwaves around the industry. At we are not changing the way we operate, even after the RDR. We welcome financial questions, simple or complex, and will ensure you receive an answer in less than 60 minutes. This means we will be able to continue offering a service that gives everybody access to professional advice, free of charge.

For more detailed information on the RDR visit the FSA website.

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