21 January 2013

Beware Restricted Financial Advice

I seem to be saying "beware" a lot at the moment. Part of the reason for that is the new financial advice regime which started on 1st Jan, and the fact that its worst points are only now becoming clear. So in spite of the FSA supposedly protecting consumers*, the best advice, as ever, is "buyer beware".
The new regime includes what the FSA calls "restricted advice" (see my previous blog on The New World of Financial Advice for an explanation). But the big issue with this approach - which would be fine if everyone is clear what they are getting - is that it is NOT clear at all. Many large financial advice firms now only offer "restricted advice" not "independent advice" but don't make that clear, and that also applies to most building societies.
The likelihood is that if you engage with a building society "adviser" you are actually dealing with a Legal & General salesman. Although commission is now banned, the advice fee is only charged if you go ahead with the product recommended. Sounds an awful lot like commission to me. What has changed?! Restricted advice is fine if you know what the restriction is and are happy with that.
* The Treasury Select Committee has just said that the FSA left consumers exposed to some of the worst scandals in financial history, and failed to pick up on major failures in the making. It urged the FCA (which will take over from the FSA this year) not to pick up where the FSA left off. Hmmm.

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