news & lobbying

2008 Archive - Retail Distribution Review (RDR) - What's In It?  (220 pages condensed into 1)

Reminder:  Required outcome for RDR is as follows:

• To improve financial capability and to deliver fair outcomes for consumers
• To improve clarity for consumers of the different characteristics of different service types and the distinction between them
• To raise professional standards and reduce conflicts of interest inherent in remuneration practices
• To improve the transparency of the cost of all advisory services.

The main consultation paper will be released in June 2009 with the changes being implemented by the end of December 2012. By this point, all individuals and firms will need to have met the requirements without exception.

The Proposed Changes ......................

Clarity of Service:  Independent or Sales

• Firms to be independent advisers or sales people. Those not giving independent advice or not giving advice at all will be classed as sales people (change from current categories)
  
• Independent advisers to provide unbiased, unrestricted advice based on a comprehensive and fair analysis of relevant markets (no changes here then).
• Sles based advice will include non-independent advice, execution only and non-advised guided sales.
• Non independent advice will be regarded as a form of sales service by the FSA because whilst the consumer is being advised it is from a restricted product or provider.
• A Money Guidance service will be introduced with the aim of providing clear guidance to consumers needing help on where to go for which type of investment service.

Remuneration - to be known as "Adviser Charging" and Indemnity Gone

• Product provider influence over adviser remuneration will be removed.  Advisers will be free to set their own charges for advice.
  
• Indemnified Commission Gone in 2012.  By the end of 2012 any payment for advisory services made through the customer’s product or investment must be funded directly by a matching deduction from that product or investment made at the same time as that payment.  (Suggest this is factory gate pricing as you currently know it)
  
• Customers will get separate disclosure of the costs of advice services and product cost from both independent and non independent advisory firms.
• Adviser remuneration will be called adviser charging and not customer agreed remuneration.
• Indemnity commission, otherwise known as factoring will not be allowed from 2012.

Professional Standards - Benchmark Qualification - QCA Level 4 (between FPC and AFPC as a guide) - Basic Advice 'Standard' Scrapped!

• A Professional Standards Board will be established with the same competency levels required for advisers, regardless of whether they are independent.
• For all investment advisers the benchmark qualification will be at least QCA level 4 and higher for specialists. All advisers will be encouraged to opt for higher levels of qualification to suit their specific needs.
• QCA - Qualifications & Curriculum Authority is the regulator for examination providers in England and Wales and level 4 is equivalent to the first year of a bachelor’s degree. The common equivalent qualifications are the Chartered Insurance Institute’s Diploma in Financial Planning and the Institute of Financial Services Diploma for Financial Advisers).
• Basic Advice rules that were introduced in April 2005 will be removed – another waste of money.  This covered regulated advice for the sale of stakeholder savings and investment products.

Prudential rules for Personal Investment Firms (capital requirements to you and us)

• Proposals to extend the expenditure based requirement for all firms will mean three months worth of relevant annual expenditure as capital with a minimum of £20,000. Relevant annual expenditure means the fixed level of expenditure the firm is committed to regardless of its income.  See Capital Adequacy Proposals.
  

Complaints - 'Long Stop' Limit

• The Law is 15 Years for any complaint to be time barred and 6 Years if you are aware of a problem.  There have been cases where it as been ignored with financial services.
  
• The FSA is considering the introduction of a ‘long stop’ time limit on the period within which complaints must be brought. They have decided not to consult on this issue as they have been unable to demonstrate it would bring additional benefits to consumers and firms.
  

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