Financial advice industry ‘a long way from making things better’, as banks unveil charges

High street banks including Lloyds Banking Group, HSBC, Royal Bank of Scotland and Nationwide have revealed what they will charge for financial advice, following the introduction of the Retail Distribution Review (RDR) at the end of December.

The new scheme aims at making the financial advice industry more transparent and fair by having clear fees for advice (rather than commission from providers) and splitting advisers into two categories – independent and restricted – among a number of other new rules.

Charges from many of the big banks that boast financial advisory arms have been outlined here in an article by Money Marketing.

The banks are classed as restricted, meaning they can only sell a certain set of products, often their own. Genuinely independent financial advisers, meanwhile, are not constrained by such guidelines.

“The purpose of the RDR was, amongst other aims laid down by the regulator [Financial Services Authority], to simplify the process for purchasing retail financial products and make advice more transparent”, said John Ditchfield, IFA at Barchester Green and chair of the Ethical Investment Association (EIA).

“Looking at the range of complex service propositions on offer from banks and other large insurance groups, we seem to be a long way from making things better [and] more transparent for the consumer.

“And in some cases it even looks like advice could be more expensive under the RDR.”

Ditchfield added, “We remain committed to a fully independent model where we have no formal ties with investment businesses, [which] ensures that our clients receive impartial recommendations.”

In October, Julian Parrott, an IFA at Ethical Futures, wrote how the RDR was a “double whammy” for investors, as most banks would not offer them ethical options.

In a comprehensive Blue & Green Tomorrow survey of financial advisers, to be released this Friday to IFAs and newsletter subscribers, 47% of advisers saw RDR harming clients’ interests against 27% that saw a benefit for clients. Conversely, 42% of respondents saw benefits for their firms, against 36% expecting harm.

Blue & Green Tomorrow has interviewed a number of specialist ethical financial advisers in the past, and they are located all across the country. Have a look here to find the one nearest to you.

Further reading:

Investors will have to resort to execution-only services with RDR changes

Investors won’t get ethical solutions from most banks, so RDR is a double whammy