FSA CEO, Hector Sants, has ruled out 'any dilution of the RDR proposals' in a personal submission to the TSC. He said any watering down of the proposals would result in "an increase in the cost to consumers through continued mis-selling".
The TSC collected 203 submissions on the RDR from IFAs, providers and trade bodies, with many respondees expressing their concern about areas including the lack of grandfathering and long stop and the number of advisers who will be forced out of the industry.
However, in its own submission, the
FSA said: "The RDR is absolutely vital if we are to build consumer trust and confidence in the advice sector". "We expect the package of changes we are making will result in a sustainable market that is a better place in which to do business in the long-term and advisers will be better equipped to give good quality advice." The regulator said it had ruled out grandfathering partly as the majority of respondents, including AIFA and other adviser representative bodies, were against the proposals.
In his letter to the TSC, Mr Sants sought to set out why the FSA remains committed to modernising the industry through the RDR, in order to address a market that did not and does not work well for consumers, advisers or the firms which provide these products and services.
RDR proposals:
• increasing the professional standards of advisers;
• improving the clarity with which firms describe their services to customers so that they know whether they are getting advice which is truly independent (covering the full range of possible investments) or is restricted in some way (for example advising on a particular range of products, or on products from one or a limited range of product providers);
•addressing the potential for commission bias to distort consumer outcomes; and
•ensuring personal investment firms have adequate capital resources for complaint redress.
"Our rules on adviser charging, service description and capital have already been made by our Board. We believe all these reforms are necessary in order to equip retail investment advisers to deal with the challenges they now face."
Professionalism:
The new measures come into effect at the end of 2012, by which time existing individual advisers will have had four years to prepare, including meeting the qualification requirements. "We were clear in November 2008 about our intention to raise professional standards, including modernisation of qualifications and we said that those who are on course to complete, or already hold an appropriate qualification could continue to give retail investment advice."
The new requirements will apply to all those giving investment advice to retail customers, regardless of the type of firm they work for (e.g. banks, insurers, independent financial advisers, stockbrokers or wealth managers). They will not apply to those who advise solely on mortgages or general insurance. Mr Sants said that one of the main awarding bodies, the Chartered Insurance Institute (CII), indicate they have seen a 65% increase in candidates sitting their qualifications in 2010 compared to 2009.
Mr Sants also commented on: problems in the market, adviser charging, capital resources and RDR costs. He finished by saying: "Despite the vocal concerns of some in the IFA community, we believe the RDR is absolutely fundamental to address the root causes of numerous problems we have observed in this sector and to improve consumer outcomes".
Full article (including letter)
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