Adviser > Your business > RDR > June 2009 Update > Retail Distribution Review – June 2009 Update
Retail Distribution Review – June 2009 Update
The FSA's fourth instalment on the long Retail Distribution Review (RDR) path was released on 25 June 2009. Find out what the latest update means for you.
We believe this paper is one of the FSA’s best thought out, and the RDR's current direction points to a large step forward for financial services.
The paper lays the foundations for enhancing the image of financial services. This will benefit all market participants in the long run. The RDR will ultimately help promote the benefits of independent advice in particular, and remove some of the market distortions and biases that have held the market back. We doubt the FSA's Cost Benefit Analysis can stack up without a vibrant independent market.
Our summary view of the paper is noted below but we've also taken a closer look at the impact of the FSA's paper.
Taking a closer look at the paper
The latest paper has taken a consultation format with 20 questions being posed by the FSA to gauge industry views. It's important to remember that what the FSA is saying at this stage is not final but getting extremely close to it.
This article is broken up into four short sections and takes a closer look at what the FSA said, what our views are on it and, most importantly, what that means for you, the adviser:
The good
- Advice labels seem clearer and are consumer researched
- Adviser Charging still a key focus applying to both independent and restricted channels
- GPPs firmly in focus for adviser charging. "Arranger charging" sounds promising
- Soft commissions specifically challenged
- FSA is acting to prevent Adviser Charging being undermined
- Some leeway shown over written examinations
- An end to purely sales-driven rewards
- Legacy business excluded
The bad
- Strict matching on regular premiums may make them unattractive for advice
- No mention of long-stops
- Risk of EPPs and CIMPs being used to perpetuate commission bias
- Risk of Basic Advice being used to perpetuate commission bias
- No lighter touch for "simplified advice" could prevent advice access for many people
The unclear
- Wraps and independence issue left to a thematic review
- Protection and mortgages unclear but may alter since FSA recognise risk of protection being seen as an easy target for those firms unwilling to change business model.
- New entrants to existing group schemes. Will these be classed as new or legacy business?
- Shouldn't advisers benefit from a regulatory dividend for early adoption of the RDR?
As Scottish Life distributes its products solely through IFAs and EBCs, your interests are intrinsically linked to our own. We want to know what you think about the RDR. Use our feedback form to tell us your views. We’ll post comments and answer queries in due course.
A quick reminder of what the RDR is trying to achieve
- An industry that engages with consumers in a way that delivers more clarity for them on products and services
- A market which allows more consumers to have their needs and wants addressed
- Remuneration arrangements that allow competitive forces to work in favour of consumers
- Standards of professionalism that inspire consumer confidence and build trust
- An industry where firms are sufficiently viable to deliver on their longer-term commitments and where they treat their customers fairly
- A regulatory framework that can support delivery of all of these aspirations and which does not inhibit future innovation where this benefits consumers
For clarity, the RDR will form a framework covering regulated firms, providers and distributors of retail investment products and services. Importantly, this is not just about packaged products. General insurance, protection and mortgages are not covered at this stage, though the FSA flags their awareness and willingness to act if this leads to market distortions. In particular, pure protection looks likely to come under further scrutiny.
Tell us your views
Please let us know what you think about the RDR and about our response to it.
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