Adviser > News > January 2010 > RDR Update - CP09/31
RDR Update - CP09/31
The Financial Services Authority (FSA) issued an update on the Retail Distribution Review (RDR) on 16 December 2009. Our Business Development Manager, Fiona Tait outlines the practical implications of the latest proposals.
Fiona Tait
CP09/31 builds on the main proposals presented by the FSA in their original report – Discussion Paper 07/1 - and considers how far they should apply to the group pension and protection markets.
No Doubts
This fifth paper from the FSA and the unchanging nature of some of the key proposals shows one thing - the RDR is not going to go away. We don't even have the comfort of a change of government policy to create a last-minute swerve. The Conservatives, who are not exactly members of the FSA fan club, have stated that they do not intend any changes to affect the implementation of RDR.
Whether you support the RDR or not, you will have to have the appropriate qualifications and if you sell pensions, you will have to operate without indemnity commission.
Qualifications
The requirement for a minimum qualification standard of QCF Level 4 has not changed since the original paper in 2007 and is set to stay.
However the FSA have given in a little in the battle for alternative assessments. These will now be acceptable before and after 2012 providing that the technical content is of an equivalent standard. This is good news for those who simply don't do well in formal exams but it is not intended to provide an easy option.
What do you think about the exam standards?
The Financial Services Skills Council (FSSC) is welcoming feedback on the new benchmark exams for advisers.
To find out more about the consultation and access their online survey, which will be available until 5 February 2010, visit www.fssc.org.uk.
No Regrets
One of the most useful parts of the paper is the table of current qualifications that meet QCF Level 4 requirements. There is no guarantee that these qualifications will be the ones approved post-RDR, though if you pass enough of them now, you will definitely avoid sitting whatever the new versions are after 2012.
As a result there is no downside to simply gritting your teeth and getting on with it.
Professional Standards Board
The FSA had previously proposed overseeing all of this by creating a Professional Standards Board. They now propose to cover this role themselves within their existing structure and award recognition to other professional bodies. This should reduce costs for the FSA and won't do the professional bodies any harm either.
Remuneration
Adviser Charging is another issue that has been with us since 2007. It has been re-named a couple of times but remains essentially unchanged.
Your clients will not have to pay a fee but they will see an up-front charge for advice, which could then be met by a deduction from their investment policy. This is of course particularly tax efficient with a pension plan.
Consultancy Charging
The big news in this paper is that the FSA agree that the principles of Adviser Charging should apply to group pensions as well as retail investments.
Consultancy Charging will operate in a similar manner to Adviser Charging. However the adviser will explain the remuneration they will be taking to the employer rather than the end customer. This is a model that Scottish Life has been successfully operating in the group pension market since 2005.
Pure protection
The FSA doesn't believe that the same level of consumer detriment from commission exists for pure protection as it does for investment products. As a result, commission will not be banned for protection sold under the ICOBs compliance regime.
As Protection products are sold through our sister companies, Bright Grey and Scottish Provident, we are glad to see that the FSA has listened to industry views on this issue.
Find out more
For a detailed analysis of how the FSA's proposals affect you and your business, visit www.scottishlife.co.uk/rdr.
Note:
- Discussion Paper 07/1: A Review of Retail Distribution, Financial Services Authority, June 2007.
- Consultation Paper 09/31: Delivering the Retail Distribution Review: Professionalism; Corporate pensions; and Applicability of RDR proposals to pure protection advice, Financial Services Authority, December 2009.
For professional advisers only
