In the final few weeks before 'RDR Day' (31.12.12), the FSA answers questions on qualifications, waivers and facilitation of adviser charging.
This issue covers:
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Communicating with consumers.
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Qualifications Q&A.
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Waivers.
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Unit class conversions.
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Facilitation of adviser charging.
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Distinction between product costs and the cost of advice update.
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Policy update.
Waivers
When the new RDR requirements come into force on 31 December 2012, firms must ensure that their retail investment advisers, who were assessed as competent as at 30 June 2009, do not carry on certain activities unless they have updated their appropriate qualification and, where applicable, completed qualification gap-fill.
Where there are exceptional circumstances that prevent an individual from attaining their qualification by the required date, the FSA may grant an extension to the firm in the form of a modification (a ‘waiver’) to its rules. For example, when their employee has been unable to obtain the qualification due to a serious health issue for which the individual can provide evidence that it is severe enough to prevent them for preparing for and taking the examinations... The regulator cannot grant a modification unless it is satisfied that certain tests have been met, and the firm will need to submit evidence to support an application. This test requires a firm to demonstrate that the rule is either unduly burdensome or not fit for purpose and that modifying it does not create an undue risk for consumers. Full details of the requirements and process can be found on the FSA's website.
The regulator does not expect applications to be made because individuals have merely run out of time – extensions will usually only be available where the applicant can demonstrate that they have already done everything possible to meet the requirements, including exploring all other alternatives before applying.
Firms planning to submit applications should do so as soon as possible. Further details and how to apply are available within the guidelines on the FSA website.
Facilitation of adviser charging – obtain and validate
Where a provider or platform opts to facilitate an adviser charge, it is required to obtain and validate an instruction from the client. In this situation, the instructions must come from the retail client. It would be contrary to the FSA's Conduct of Business rules if the instruction came solely from the adviser.
The regulator has noted different approaches being adopted by product providers/platform service providers and is concerned that some of these will not meet the ‘obtain and validate’ requirement.
The FSA is not saying that all existing arrangements will be non-compliant post-RDR – just that firms should not automatically assume that they can continue existing arrangements without checking that they comply with the new incoming rules and guidance.
Full RDR-Newsletter
© FSA - Financial Services Authority
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