30 March 2012

FSA must do more to help IFAs clear the final RDR hurdles

With fewer than 10 months to go before the introduction of the Retail Distribution Review (RDR), the regulator still has several areas to clarify before IFAs can have a clear run at the 31 December finishing line.

The Financial Services Authority (FSA) still needs to clarify its stance on platforms. It is unclear whether non-advised clients will be brought under the RDR umbrella. Operating dual pricing for advised and non-advised clients would be an administrative nightmare for platforms, fund providers and advisers.

It makes sense for one set of rules to apply to all platform customers whether they are advised or non-advised. The RDR is about bringing more transparency to the market place and the idea of charging different prices for different customer types seems a backward step.

It would also appear naive to think there are no transparency issues when retail clients go direct to a platform. At the moment the annual management charge (AMC) on a fund does not make it fully clear to direct clients who receives what in fees, and that up to 0.75 per cent of a 1.5 per cent AMC could be retained by their platform or product provider.

For advisers, 2012 is the year many will have to make some key decisions. By the end of the year they must complete the required QCF level 4 competency qualifications and decide whether their status will be independent or restricted. To have independent status, according to the FSA any advice offered must be ‘unbiased and unrestricted, and based on a comprehensive and fair analysis of the relevant market. It is designed to reflect the idea of genuinely independent advisers being free from any restrictions that could impact on their ability to recommend whatever is best for the customer.’

Conversely, the FSA defines restricted advice as ‘advice which is not independent… (e.g. advice on a limited range of products or providers)’.

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