The FSA has confirmed that the Retail Distribution Review (RDR) changes have come into force from today, 31 December 2012.
The FSA says that this is its most extensive and far-reaching policy project to date. Much of the role of the FSA is due to be replaced by the Financial Conduct Authority from April as a new regulatory regime is introduced.

The FSA says the RDR changes will "aim to improve the quality of advice,  reduce mis-selling and, in the longer term, improve the level of consumer confidence and build general levels of trust in advisers."

Among the key changes coming into force today are:
The cost of advice must be made clear to the customer

The FSA says that advice has never been free - but this hasn't always been made clear. It is important that people understand that advice comes at a cost and what that cost is, says the regulator. At the moment, the FSA believes that the cost of advice is often obscured in the price of the product and people are not aware how much their investment advice is really costing them.

A spokesman said: "We have banned commission payments from product providers to advisers. Advisers will have to clearly explain to the customer upfront how much advice will cost and how the customer will pay for it. This will ensure that the advice advisers give will be in the best interests of the customer, not driven by how much commission they could earn."

The FSA is also making sure that advisers are competent by raising their minimum professional standard and by making sure that advisers undertake regular training to keep their knowledge of the products in the market up to date. Advisers will need to subscribe to a code of ethics, hold an appropriate qualification, carry out at least 35 hours of continuing professional development a year and hold a Statement of Professional Standing (SPS) from an accredited body. The Institute of Financial Planning has become one of the new accredited bodies.

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The FSA says that from now on all financial advisers will have to clearly describe their services as either 'independent' or 'restricted'. Advisers that provide 'independent' advice will be able to consider all types of retail investment products which could meet the customer's needs and consider products from all firms across the market. Some forecasters have predicted that thousands of commission-based IFA will leave or have left the sector or moved to areas where commission can still be paid, such as protection or mortgages. However, it may not be clear from some time exactly how many advisers have changed status or quit industry.

A 'restricted' adviser will only be able to recommend certain products, product providers, or both. This means they might only offer products from one company, or just one type of product.

Linda Woodall, head of investment intermediaries, FSA said: "The changes will improve customer confidence – we want people to feel that they are getting a service from their financial adviser that is relevant to their circumstances and in their best interests.

"These changes are about making the cost of advice clearer, where else would you buy something without knowing in advance how much it costs? Customers will now know how much advice is costing them, the service that they are receiving and be reassured that their adviser is qualified."

The FSA has produced a consumer guide to explain the changes and to help consumers discuss these changes with their financial adviser. Here are five questions it suggests consumers ask their adviser:

1.      How much will your advice cost me and how is this calculated?
2.      Can you explain the different ways that I can pay for advice?
3.      Can you explain what products you can advise me on and any areas you can't help me with?
4.      How often will you review my investments?
5.      Can you show me proof that you are qualified to give advice?