The Financial Services Authority (FSA) has outlined how it will measure the success of the retail distribution review (RDR), presenting nine key indicators and setting baselines for the post-implementation review.
It will not measure the short-term success of RDR until at least two years after implementation, meaning no sooner than the end of 2014. Long-term success will not be gauged until at least 2020. These are the indicators and the latest research the FSA will use to compare the RDR outcomes against:
Short-term - from 2014:
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Firms adhere to the new landscape (e.g. describe their advice services appropriately as independent or restricted);
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Advisers meet required standards of professionalism;
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Consumers understand the difference between independent and restricted advice;
Long-term - from 2020:
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Firms sell fewer products that pre-RDR currently pay high commission, sell more that currently pay little or no commission, and sell more cheaper/lower charging products;
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Consumer engagement in the market, caused by improved perception of the quality of services;
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Fewer unsuitable sales;
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Improved product persistency;
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Firms' solvency increases along with cyclically adjusted profitability;
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Unintended consequences of the RDR do not materialise or are mitigated appropriately.
The FSA is closely monitoring activity around commission levels and will take "any action necessary to prevent behaviour that is not in the spirit of the RDR".
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