Advice reforms leave investors concerned

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Almost one in three investors are worried about making their own investment decisions following changes to the way financial advice companies operate, according to new research.

More than six months ago, new rules from the chief city regulator came into force. Known as the Retail Distribution Review (RDR), the aim was to raise professional standards within the industry and make it easier for consumers to understand the cost of advice.

However, some financial firms decided to cut back on face-to-face advice services or abandon them altogether. People with smaller pots of money were affected the most.

Now TD Direct Investing, a leading broker, has found that 32 per cent of investors are nervous about their investment choices.

Stuart Welch, chief executive of TD Direct Investing, said: “In these tough economic times when people are trying to save what they can for their future years, it’s not great that people feel worried or nervous when they are making their investment decisions. For those left without the lifebelt of professional advice offered by some investment providers as a result of RDR, they need more support than ever to make more confident decisions.

“It’s widely reported that people need to start saving earlier for retirement but this will only happen if consumers are educated and they know where to go to get information and support.”

Under the terms of RDR, there are just two kinds of financial adviser – independent or restricted. When RDR came into effect at the beginning of the year it was expected that 5.5 million investors would cease using financial advisers or lose access to them.

TD Direct Investing’s annual Investor Confidence Survey discovered that nearly half of UK investors use the internet to increase their investment knowledge. An additional 34 per cent rely on the financial press or specialist magazines. Just 23 per cent said they take advice from a professional.

Mark Taylor, director of investment services at Equiniti, a provider of investment services and share trading facilities to corporate clients and retail investors, said: “Managing risk and achieving portfolio diversification is a widespread concern among investors.

“The Retail Distribution Review has had an impact, leaving many people without a financial adviser. But, as the TD Direct research shows, this should not inhibit prudent investment decisions, for new investors as well as for those looking to balance and diversify their portfolios. Furthermore there are many places where people can find free information as well as excellent advice in the regional, national and specialist media.” 

TD Direct Investing’s survey also found that, despite ups and downs in the market, investor confidence is robust. A third of UK investors agreed that now is a good time to invest in the UK stock market.

Mr Welch said: “Our research showed that over half of investors still don’t know what RDR is, which may be because they don’t think it affects them. One of the goals of RDR is to make costs more transparent to the investor, however in the current climate this could leave them feeling like they can’t afford the advice they feel they need. As a result, this could leave some people not knowing where to go.”

Experts agree that seeking financial advice is an important step in taking control of an individual’s personal finances, for both the short and long term. Karen Barrett, chief executive of unbiased.co.uk, a comprehensive professional adviser search website, said: “Getting more people engaged in the financial advice process is key to tackling some of the nation’s biggest finance problems such as the retirement, savings or protection gap.”

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