It seems that more and more industries are having to make some big changes in the next few years. Lawyers have had the new "Tesco Law" which enables non-lawyers to set up and own practices and now we have the Retail Distribution Review for Independent Financial Advisers (IFAs).
This review will mean that from January 2013 commissions will not be paid to advisers by insurance companies and banks or any other provider of a financial product. Instead, the adviser will have to charge an upfront fee to the client. In principal this means that the advice will be trusted more as it will not be paid for only if the adviser "makes a sale" Also all advisers are having to pass additional exams.
So what will be the impact?
Many observers have said that the public will be unwilling to pay the £200 per hour that some IFAs believe is the true cost of advice and as such many IFAs will simply leave the industry. Margins are likely to be squeezed, especially for the bigger firms that claim to be independent some may become "restricted". The term restricted refers to the fact that no adviser can really know all the products as there are simply too many so they prefer to concentrate on a few providers.
Some reports have suggested that as many as 3000 firms will go out of business but given the overall demand for GOOD financial advice should not change much then we think this is unlikely. Indeed it may even encourage consumers to talk to people knowing that they are not always going to end up buying a product or switching from one to another.
It will be interesting to see what happens in 2013 but it depends entirely on the adaptability of advisers and the perception of the consumer at large.