What the new IFA rules mean for you

published 4 January 2013

Finally it's here. The Retail Distribution Review (RDR). We've been campaigning for it for years and giving you the details in the magazine for months. But the change has actually come. From now on, independent financial advisers (IFAs) will no longer be paid for giving you advice in the form of commissions paid by the providers of the products they advise you to buy. Instead, you will pay an agreed fee direct to your IFA.

The result? Commission bias the risk that IFAs suggest you buy products that pay them high commission, rather than products that suit you is going, and so, I suspect, are a lot of the worst financial products.

Let's not forget how the cycle of commission has worked: in the past, the more money a provider has been able to make from a product, the more commission he has been able to pay, and so the more likely an IFA has been to recommend it. The worst products have carried the biggest incentives, which is something on which you can blame almost every scandal in the financial services market over the last couple of decades.

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The other big (and good) change is that your IFA will be better qualified: he has had to take exams equivalent to the first year of a degree course. You might be horrified to hear he wasn't that qualified before, but that, I am afraid, has been the way of it. And at least he is now (if he isn't or has found that the exams are beyond him he isn't supposed to be working anymore, so you might want to check).

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.