The Retail Distribution Review

Question 1

What is the aim of the RDR

Answer 1

Introduced by FSA in June 2006

Identify and address the causes of problems in relation to the retail investment market

Intended to raise the standards investors can expect from all investments advisers as they would be better qualified and keep up to date knowledge maintained.

Question 2

State the aimed benefits of the RDR

Answer 2

• consumers better understand advice services offered
• advice is truly independent & related to wide range of products offered in market
• adviser recommendations not influenced by commission paid by product providers
• unfront costs/ how much consumers would pay for adviser services

Question 3

State the 3 main elements of the RDR

Answer 3

adviser changing - aimed to ensure consumers offered transparent & fair charging system for advice received

Independent advice - aimed to ensure consumers are clear about services received

Professionalism - aimed to ensure consumers receive advice from highly respected professionals, thereby inspire confidence and build trust

*rules of implement these elements took effect 31 DEC 2012 & applies to all advisers in the retail investment market regardless of the firm they work for

Question 4

Rules in relation to Adviser Charging element?

Answer 4

• rules set that advisers can set their own charges & separately charge clients for their services
• product providers banned from offering commission to advisers
• charging structure is based on level of services provided
• advisers must be unfront is disclosing charges & ongoing charges must be agreed with clients for ongoing services

Question 5

Rules in relation to independent advice element?

Answer 5

• rules require advisers to clearly describe their services as independent or restricted
• independent offer broader range of products, provide unbiased and unrestricted advice based on comprehensive analysis of relevant market

Question 6

Rules in relation to the professionalism element?

Answer 6

• rules require advisers to hold statement of professional standing issued by body accredited by FCA
• advisers much also hold an appropriate qualification and observe a code of ethics (subject to as an approved person)

Question 7

Explain the impact of the RDR on offshore centres?

Answer 7

RDR only applicable in the U.K/ although offshore centres recognise need to keep up to dat with the UK initiatives

Regulators offshore have made public statements informing organisations that conduct investment business about actions they will take to bring legislation of jurisdiction in line with new standards imposed by RDR/ slight differences

JSY response to RDR = “the review of financial advice” rules and RDR type competency requirements took effect 1 JAN 2014