| The Retail Distribution Review proposes changes to how financial products are sold and how advice is remunerated.
The aim of the Retail Distribution Review (RDR) is to improve customer outcomes by making sure that they are receiving the best advice and solutions to suit their individual needs. This includes things like increasing the transparency around fees, showing exactly what a customer is paying for and how that advice or product is going to benefit them.
For customers, a major mind-shift is required in understanding the value of advice. Currently the cost of advice is built into the commission structure of a product and most people perceive the advice element as being “free”. This can undermine the true value of advice and the role of a good financial adviser. In the UK, where RDR has been in effect for several years, it took some time for customers to adjust to the concept of paying for advice, even though they had actually always done so.
The role of advice, as provided by a financial adviser, is to educate, guide, support and fulfill the financial planning needs of a customer in a responsible, transparent and coherent manner. The challenge for long-term insurance, though, is to convince the customer of the importance of making provision to meet their future needs, especially as the gratification is delayed, or sometimes not even recognised, if it’s only the customer’s heirs who’ll benefit.
Unfortunately, many of us consider things like life insurance and retirement funding as a grudge purchase. When we’re younger, we feel invincible so the idea of death or disability is hard to relate to, and retirement seems too far away to really matter to us. We tend to be eternal optimists until something happens to us or someone close to us – and then it’s often too late. So given that advice is about helping us do something we prefer not to think about, is it something we would be prepared to pay for? We believe that RDR will improve the outcomes for both the customer and the industry, but only if customers experience the benefit of good advice.
Although RDR will only be phased in over the next three years, at Liberty we’re already aligning our products and support to enable our advisers to provide the best possible advice and solutions to our customers so that the value of advice is fully understood and recognised. We’re using technology and communication to understand and service our customers and will be introducing further innovative solutions to match our customers’ needs.
As a customer you will have the right to:
- Be fully informed as to the costs of both the advice and the product and to agree to these fees
- Reasonable fees which are in line with the service received
- Change advisers or discontinue on-going fees if you’re not receiving ongoing advice
- Receive advice on the best product for your needs and a reasonable expectation of a fair outcome
|
