How The Retail Distribution Review Affects You.

In our first newsletter of 2013, we shall expand on what’s happening in your world and the wider financial world.

In a recent sample survey of some of you, we were somewhat surprised to find you weren’t entirely sure how you pay us.  This is particularly pertinent since January 1st was the long awaited date on which the ‘Retail Distribution Review (RDR)’ was finally implemented.

One of the issues that the RDR has changed is the way advisers must agree and declare remuneration, and has effectively scrapped the old product based commission system for investment advice.  It is no longer acceptable for an adviser to hide the amount they earn from a product provider in the small print.  We have been applying this RDR requirement for over a decade, meaning that this aspect of RDR has little impact on our relationship.

The other major change under the new RDR legislation is that an Adviser has to declare to the client whether or not they offer a ‘restricted’ advice and/or product service or an ‘independent’ advice and/or product service. As with the old rules, an independent adviser has the freedom to advise and recommend products from any source that they feel are within the client’s interests, whereas a ‘restricted’ adviser is limited to the services and products from a panel of providers that the company they work for has deemed to be both suitable and profitable.  Due to the increased compliance, qualification requirements and oversight costs of remaining independent, many firms have chosen to alleviate this burden by becoming restricted rather than staying independent.  Coutts, Towry and St James Place, along with most of the high street banks are some of the more well known names to follow the restricted advice path. We can confirm to you that this is not a road that we intend to travel and are remaining independent, as we believe passionately that having an independent status is in your best interests.

The majority of you have funds invested via our preferred ‘Wrap Provider’, Transact.  Transact is effectively an administration shell that allows us, as your planners, to invest in the best funds to meet your needs in a cost effective and user friendly manner.  So whether you have pensions, ISA’s, general funds etc, we can apply your specific asset allocation effectively across your longer term funds.  Transact is not an investment manager.  We generally charge a fee of 1% of your invested assets, (subject to discounts for large portfolios).    In return for this fee, we manage not only your portfolio’s, but more importantly, your wider financial plan, including cashflow forecasting, research and reporting, administration, cash accessibility, income streams and estate and tax planning.  In short, your fee pays us to help you live the life you want with peace of mind, control and mitigation of the various risks that you may face. You don’t have to look far to see the sometimes disastrous consequences of indisciplined and random investing, and an uncoordinated approach to dealing with one’s affairs. If you are in any doubt about how this process works, please give your planner a call.

On a lighter note, you may want to read about Orlando the Cat beating professionals and students at stockpicking . We like this story very much!

Click here to read the article in full.