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RDR deadline encouraging mis-selling by IFAs, says wealth manager

Investors need to be wary of unscrupulous financial advisers’ last-minute attempts for one final payday before the Retail Distribution Review (RDR) comes into force, warns a wealth management expert.

25 October 2012

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Unprepared IFAs are trying to cash in on loopholes by mis-selling investment products ahead of the implementation of RDR, which takes effect on 31 December 2012.

Colin Lawson, managing partner at Equilibrium Asset Management, said: “The new RDR rules mean advisers can only be paid for the service they provide. However, it seems some unqualified IFAs are looking to exploit loopholes in RDR so they can continue to earn commission, trapping investors into poor performance products.

“Investment bonds are one such product commission-hungry IFAs are misusing. If these are purchased pre-RDR then, due to a quirk in the RDR rules, investors will have to continue to pay commission even after RDR is implemented,” explained Lawson.

“Investment bonds can be a great financial option, but we’re concerned these are being pushed by IFAs even if they aren’t the right solution for the client’s investment portfolio.”

The Financial Services Authority (FSA) reported a 16 per cent rise in the number of investment bonds sold last year, which Lawson believes is a direct result of IFAs taking advantage of the fact that they can continue to receive ongoing commission without having to provide any ongoing service.

“It is vital that investors find out how their IFAs are preparing for RDR, ask questions about their fee structure, renewal fees and charges to pay on investments. Also, ask what qualifications they hold,” he said.

For more information on RDR, see

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