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Financial Advice is Improving
The financial regulator's review of independent financial advice has shown “early indications” that advice has improved and some of the costs have come down since a major change in how advisors make money.
Financial advisors were banned from taking commission from Pension, ISA and other investment providers two years ago for selling their products.
Since then, there has been “a very noticeable decline in the sales of those products that…came with higher commission,” said Martin Wheatley, chief executive of the Financial Conduct Authority.
Now that pension and other investment providers cannot pay commission to advisors to convince them to sell their products over better ones, they have started to compete with each other more on price. The review has found that their prices have fallen, which lowers the average cost of investing, regardless of whether you have an advisor.
The review shows improvements in how firms disclose the costs of their advice. However, it showed that some further improvements are needed, particularly in the way that the cost, in cash terms, of ongoing services is disclosed.
Europe Economics, which was commissioned by the FCA to undertake the review, also found that sales of products that were low or no commission before the changes have increased, which is a sign that commission is no longer a driving factor in advisors’ recommendations.