The role of IFAs is changing

Whether you need a mortgage, want to ensure you’ll have enough money for retirement or are in the process of finding cash for a new business venture, you need to source the best financial advice available.

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Many people turn to Independent Financial Advisers, or IFAs, when they want information and guidance on finances – and for good reason. IFAs are independent, as their name suggests, which means they will always offer impartial advice rather than that tied to one particular producer or product.

Changes

But the role of IFAs is changing, due to new rules and regulations, mainly introduced since the various financial scandals and mis-sellings of the recent past. Many of these changes have been taking place as a result of the introduction of the Retail Distribution Review (RDR), which started to come into force at the close of 2012 and has been taking effect ever since.

The RDR was launched by the Financial Services Authority (FSA) with the aim of making the retail investment market fairer and more transparent for consumers. Essentially, the review increased the minimum level of qualifications required by an IFA, as well as making charges more transparent and, crucially, putting an end to commission-based sales.

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According to the FSA’s successor, the Financial Conduct Authority (FCA), there are more changes to follow.

Impact

The reforms introduced so far have had a huge impact on IFAs. According to the Cass Business School, based at the City University London, the number of Independent Financial Advisers fell from 40,000 in 2011 to 31,000 in 2013. This, they suggest, was due to many IFAs no longer being able to meet the required qualifications.

Other impacts have been the fact clients now have to pay upfront for advice, rather than paying with commission, which has led to some customers thinking they are getting worse value for money.

Future reforms are yet to be announced, but one change coming into effect soon is the introduction of the General Data Protection Regulation (GDPR), a new piece of legislation coming into force in May 2018 which will alter how IFAs store, secure and use clients’ data. This will require advisers to install new IFA software, such as that available at https://www.intelliflo.com.

Using an IFA is always a good idea. Just be sure they’re complying with the new regulations before handing over your hard-earned cash.

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