Adviser > Your business > RDR > December 2009 Update > Key facts of RDR Consultation Paper 09/31
Key facts of RDR Consultation Paper 09/31
On 16 December 2009 the Financial Services Authority (FSA) released a new Consultation Paper - CP 09/31 - on delivering the Retail Distribution Review. Get the key facts.
Our brief update gives you the key facts of the latest proposals on professionalism, corporate pensions and protection advice.
The FSA is welcoming feedback on these proposals by 16 March 2010. We strongly encourage you to take the time to reply to ensure the FSA hears from the Independent Advice sector.
Professionalism
In depth
- for a copy of the CP09/31 consultation paper
- to submit responses to the paper
- and to view other FSA reports on the Review.
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The FSA now propose to perform the governance function for professional standards. Previously, they had talked of setting up a separate Professional Standards Board.
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The FSA will formally recognise professional bodies that meet certain criteria. Recognition would be for a defined period and renewal provided following an independent audit. These bodies will be at the "front-line" of monitoring their members, performing functions such as leading professional development of their members, monitoring members' compliance and applying disciplinary measures where required.
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Membership to one of these bodies will not be mandatory. However, there is an expectation firms will prefer to employ advisers who have membership. Membership would be a "safe harbour" and independent verification that they are trained and competent.
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A short-to-medium term increase in complaints is anticipated as consumers become more aware of the standards they can expect and willingness of the professional bodies and the FSA to act.
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QCF Level 4 is reiterated as the required minimum standard from the end of 2012. New qualifications will be approved by June 2010 with exam materials expected from October 2010.
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For 'existing advisers' (those "deemed competent" before July 2009), a list of transitional qualifications is given in the paper. Investment advisers currently with these qualifications or who achieve one of these qualifications before the end of 2012 can attain the required standard by "topping up" on any knowledge gaps through Continuing Professional Development (CPD). Sample guidelines on the knowledge areas and CPD top-up are also outlined in the paper.
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Advisers new to the industry (i.e. who weren't "deemed competent" before July 2009) will have to attain the QCF Level 4 qualifications standard but won't have a deadline of 2012. However, the FSA strongly hints that it expects and may enforce prospective advisers to attain the required qualification standard in a certain period of time or after a given number of attempts.
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Alternative assessments may be allowed if they meet at least the same standards as written or oral assessments. Examples suggested are coursework and practical assessments.
- The intention is to add qualifications, the awarding body, when the qualifications were attained and professional body membership details to the FSA Register of approved individuals.
Corporate pensions
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Commission will be banned for GPPs (defined as Group PP, Group Stakeholder and Group SIPP). 'Consultancy Charging' (previously termed 'Arranger Charging') will be introduced. All advice firms setting up or administering GPPs must agree remuneration with the employer. The charge can be a fee from the employer or deducted from the contributions on a pound for pound basis through product charges. This is regardless of whether the individual member receives advice or not. No factoring (spreading of the charge for remuneration) will be allowed.
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New entrants and increments to existing GPP schemes will be allowed on the scheme's existing remuneration structure. The FSA will monitor advice being offered between now and the end of 2012 that is "not justified and is being given to achieve further commission and frustrate our intended rules".
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The commission ban will be extended to the investment element of an Occupational scheme and members signed up through a Basic Advice model.
Pure protection advice
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The FSA does not perceive the same level of consumer detriment in the protection market as it believes exists in the investment market. Commission will not be banned for protection sold under the Insurance Conduct of Business Rules (ICOBS) compliance regime and there will be no extension of Adviser Charging to this market.
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The FSA believes there is a case for greater transparency and is developing proposals for strengthening commission disclosure, including for banks and tied agents.
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Consistency with the labeling from previous RDR papers ('Independent', Restricted, 'Simplified Advice' and 'Basic Advice') is likely to be brought in for pure protection. The full range of protection products will need to be considered to describe services as 'Independent'.
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The FSA is undecided on whether to apply the same level of qualifications and professional standards for those selling pure protection only. It is also undecided whether those requiring QCF level 4 for investment advice would need to meet those standards to advise on pure protection.
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Firms can currently sell pure protection under Conduct of Business Sourcebook (COBS) instead of Insurance Conduct of Business Rules (ICOBS) if they prefer simplicity of compliance regimes across investment and pure protection. If firms continue to sell protection products under COBS, they will need to apply all post-RDR COBS rules, including Adviser Charging.
Next steps
The FSA plan to issue
- a paper covering Adviser Charging and service labels in the first quarter of 2010
- final decisions and rules on the governance of professional standards and corporate pensions in the third quarter of 2010.
Implementation of RDR proposals is still targeted for the end of 2012.
Reference: Delivering the Retail Distribution Review: Professionalism; Corporate pensions; and Applicability of RDR proposals to pure protection advice, Consultation Paper 09/31, Financial Services Authority.
For professional advisers only
