What is the RDR? | December 17 2010
What is the Retail Distribution Review and what does it mean to you?
In June 2002, Ron Sandler published a report into the UK savings market which identified some structural issues in the industry. His suggestions at the time included a shake-up of the payment options for advice and stricter qualifications for advisers.
Four years later the Financial Services Authority instigated further investigation of the market through the Retail Distribution Review (RDR). After four more years and many consultations, the final shape of the RDR is finally becoming clear. Essentially the RDR can be broken down into two key elements:
1. Qualifications. All advisers, whether they are independent or tied to one company, must be qualified to a specified minimum level. This is designated as QCA Level 4 and while there are a few different exam awarding bodies, the most popular is the CII Diploma (DipPFS).
2. Charges. Commission payments will not be allowed for pension and investment advice (although they may still be allowed for mortgage and protection advice). All costs for advice will be agreed between the client and the adviser upfront and can be paid either directly or through any recommended product.
The rules within the RDR will come into effect from 31 December 2012. This is a fundamental change to the industry and will put significant pressure on providers and advisers alike over the next few years.
There has been much comment that the effective result of the RDR may be a reduction in advisers and also an advice gap for people with lower income or lower asset values. In fact, the issue has recently been debated in the House of Commons and through the Treasury Select Committee.
While there may be some tinkering around the edges, the core elements of the RDR are likely to remain. It is worth, therefore, asking your IFA how close they are to meeting the new rules and, indeed, if they plan to stay in business after 2012. We will!
Take a look at us and our qualifications
Look at our transparent approach to fees
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The views expressed in this article are those of the author and are not intended as personal advice. Protection & Investment Ltd are authorised and regulated by the Financial Services Authority.
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