For the first time in South Africa, financial advice is set to become a billable service. Known as the Retail Distribution Review (RDR), the first phase will be implemented later this year (2016), introducing some significant changes for both consumers and financial advisors alike.
As with all change, some sound preparation and a positive outlook will make for a smoother adjustment. One of the main changes in mindset is to accept that making direct payment for financial advice is fast becoming a reality.
RDR forms part of the Financial Services Board’s (FSB) framework that seeks to ensure fair outcomes to customers and tries to minimise potential conflicts between the interests of customers, product providers and advisors.
It is important for consumers to be aware that charging direct payment will be in place of commission based fees, which many consumers don’t generally think of as payment for advice.
Consumers are likely to face various different methods of charging by advisors. They could be billed at an hourly rate, just as they are billed when they consult a lawyer or a medical professional. Alternatively, they could be charged per consultation session or be billed a fee that is linked as a percentage to the size of the investment, similarly to the way a real estate agent would operate.
Customers pay for an advisor’s time, trust and relationship and quantifying these essential elements is found in every point of contact between myself and you.
We will all need to understand that fees are just a different way of paying for all that myself and my team offers. The FSB believes that the RDR will form a win-win situation for all parties involved.