Research & Thoughts

Retail Distribution Review (RDR)

They’ve been reviewing the situation

Retail Distribution Review (RDR) is coming. What will be the true impact for financial advice providers? And could investors find themselves in a ‘land of unintended consequences’?

Financial advice – a landscape of radical change
Crisis brought the less edifying aspects of financial services practice onto the front page. Yet even before 2008 and a time of great uncertainty, governments were pressing regulators to re-examine existing rules, or to draft new and tougher legislative frameworks. The stated goal was impartiality of financial advice.

The Financial Services Authority - FSA - in the United Kingdom (echoed in the European Commission’s 2009 publication on Packaged Retail Investment Products - PRIPS) intends radical change to the landscape of financial advice.

Jon Pain, the FSA’s Managing Director for Supervision, has made it clear “... RDR applies across the market place not just distribution – IFAs, Fund Managers, Banks, Private Banks, Insurers and many others, all need to be thinking about what impact the RDR will have...”

There is no shortage of impacts. For example, hidden charges will have nowhere to hide. Emphasis on the need for transparent mechanisms for consumers to pay for advice means the FSA has focused on front office remuneration and commissions.

The FSA also wants to introduce a level of professionalism more closely related to the standards applied in areas such as accountancy. As a blueprint, the Retail Distribution Review proposes the values and objectives.

In the new environment, from the end of 2012, those who offer financial advice and those who seek it will face new rules and new dynamics in their relationships.

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