A landmark shake-up of the financial advice market takes effect today, meaning most consumers now have to pay an upfront fee for new investment and pension advice.

The new rules, which aim to stop mis-selling, will put an end to financial advice which appeared to be free, though this was never the case. Advisers previously took a cut of the sum invested, via the company providing the product, as a commission payment.

The Financial Services Authority (FSA) hopes the rules will stop advisers recommending deals which pay them the most commission.

But critics have warned the new fees could surprise many — which could push them towards banks who usually just push their own products, which are often not suitable for their customers.

The rules only apply to new products you take out from today. Research suggests nearly 16 million people own a financial product such as a pension or a savings, and around half are estimated to have used an adviser to buy them.

What will you pay?

The new regime won't make advice any more expensive. It changes how consumers pay, meaning they may need to fund the cost at the outset.

The amount you pay will vary wildly depending on your circumstances. Research by financial adviser service Unbiased.co.uk has outlined possible upfront costs, based on typical scenarios:

  • Advice on a £500-a-month pension contribution: £600
  • Converting a £100,000 pension fund in to a lump sum and annuity (regular income until death): £1,500
  • Advice on a long-term care product: £600
  • Investment strategy advice on a lump sum of £25,000: £750

  • Investment strategy for a £50,000 inheritance for a 50-year-old: £1,500
  • Advice on setting up a stocks and shares Isa: £350
  • Advice on setting up a life assurance policy £500

'Raising standards'

The changes will also see advisers needing to subscribe to a code of ethics, undergo at least 35 hours of training a year and hold a Statement of Professional Standing from an accredited body.

Linda Woodall, head of investment intermediaries at the FSA, says: "These changes are about making the cost of advice clearer.

"Where else would you buy something without knowing in advance how much it costs?"

New definitions

The new rules also mean advisers will have to clearly describe their services as "independent" or "restricted", to make it easier for customers to see which areas they can advise on and which are not covered by their services.

Advisers providing an independent service will be able to consider a range of products from firms across the market.

Those offering restricted advice, such as banks, can only recommend certain products or providers, meaning they might only offer deals from one company, or just one type of product.

Additional reporting by the Press Association.

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