Retail Distribution Review
The FSA’s Retail Distribution Review (RDR) has had the specific aim of identifying and addressing the root causes of problems that continue to emerge in the retail investment market. This has included banks, life insurers, financial advisers, building societies and fund managers.
The RDR is an extensive piece of work with far reaching and significant outcomes for the retail investment market and specifically for many smaller firms. These main topics can broadly be summarised in the following areas:
- New categories of advisor
- Capital Adequacy Requirements for firms
- Training and Competence – qualifications
- Adviser Charging proposals
We have raised concerns about the possible increases to the overall burden and cost of regulation arising from the implementation of the RDR. We are particularly concerned with specific details such as training and competence including the time scales for delivery, together with the potential consequence from the ‘burden of regulation’ with the loss of advisors from the industry. We will continue to work closely with the FSA during the progress of the RDR.
We are also working with the other FSA Independent Panels – the Consumer Panel and Practitioner Panel – to provide a combined voice on certain aspects of the RDR where our interests coincide in this vital area for the future shape a significant part of the financial services industry, particularly for smaller firms.
If you have ideas or experiences that could contribute constructively to the Panel’s opinions and debates on this topic, please do use the feedback form below.
Do you want to comment?
Thank you for providing comments. The SBPP will use this information to help inform its discussions on financial services regulation.
What the SBPP has said previously on this topic:
During 2008, the SBPP was supportive of the FSA’s decision to look at the distribution process; within this area there were a number of aspects which gave the Panel concern. In particular, at the high-level, the impact on the IFA sector could be significant. The Panel also felt that not enough consideration has been given to the inter-play between the various reviews and initiatives coming from the FSA's Retail area. This has created the impression that there is a lack of coherence, planning and vision. In this regard, the Panel welcomed the FSA's decision to delay the next formal stage of the RDR until October 2008. This allowed time to complete the Retail Market Structures exercise – an FSA initiative to give strategic direction to its overall retail agenda - which the Panel hoped would bring some context and positive benefits to the final recommendations in respect of the RDR.
In its formal response to DP 07/01 the Panel set out its specific views about the intention to introduce mandatory qualifications for advisers, firms' use of "independent” to describe their services, the role and cost of Customer Agreed Remuneration as a possible means (among others) of payment and the clarity around the proposed generic and primary advice models.
In March 2008, the SBPP had a helpful session with the FSA, providing the Panel with an early summary of the key themes emerging from the numerous responses to the 2007 RDR Discussion Paper. The FSA's work on this subject is very much ongoing and, from the nature and diversity of the nearly 900 submissions it received, it faces a significant challenge to produce an outcome that will be seen as fair and appropriate to all concerned.
In the event that some small firms may be forced to cease operating as a result of the final recommendations emerging from the RDR, as well as serving to limit consumer choice, in 2008 the Panel expressed concern that further regulatory fee increases may be necessary in those particular fee blocks. This would put such firms under even greater pressure to sustain a viable business model and, in effect, the whole issue could become self-perpetuating. This is something that needs to be monitored as we move forward.