FSA to shake up financial advice rules

NEW rules regulating how the financial advice industry can sell products to the public come into force tomorrow, promising greater competition and transparent pricing.

Under 'depolarisation' rules, the Financial Services Authority will force financial advisers to spell out how much it costs for its services and whether the product provider or customer will pay.

The overhaul of the 16-year-old regulations follows an investigation into financial advisers by the Office of Fair Trading in 1999.

The OFT said the current 'polarised' system was 'restrictive' and 'anti-competitive'.

Currently, financial advisers are either independent, offering products from the whole of the market, or tied, offering a range of products from just one provider.

From December 1, it will be possible for firms to offer advice from the whole of the market, a limited number of suppliers or a single provider.

Financial advisors will also have to produce two 'Keyfacts' documents.

The first, Keyfacts about our Services, will outline the type of advice and range of products on offer, while a second document, Keyfacts about the Costs of our Services, will detail the type of cost, such as commission or fee-based, and what the likely cost will be.

FSA director of retail policy Dan Waters said: 'This is a groundbreaking initiative which will encourage tied advisers, from branches of high street banks and building societies for example, and they can now be offered a wider range of products from a variety of providers.'