RDR

We have worked with IFAs over many years, developing systems and procedures to enable firms to work effectively, compliantly and profitably. Most areas of regulation, although sometimes difficult to embrace, can be good business and lead to the long term benefit and profitability of the firm.

Under the RDR from 1st January, 2013

• Advice will be either 'independent advice' or 'restricted advice'. 'Independent advice' will be "unrestricted and unbiased". 'Restricted advice' will apply when offering a limited range of products (e.g. single tied, multi-tied advisers and simplified advice). The advice type must be explained to customers.
• The scope of the RDR has moved beyond packaged products. If something serves a comparable purpose for the customer, it will be subject to the rules. This brings in structured products, unregulated collective investment schemes, ETFs and investment trusts.
• The use of a panel is compatible with independence, but only if it is broad in its coverage and is reviewed frequently. If a firm uses a third party for research, the firm must ensure the output is robust.
• Advisers will be banned from recommending products that automatically pay commission. Investors must be told upfront how much advice will cost and will be able to choose whether to pay a fee or have the cost deducted from their investment. The charge must be clear, as must the services it is paying for. If charged for through the product, it must adhere to a matching principle i.e. £1 remuneration matches a £1 product charge. 'Commission offsetting' will not be possible.
• Providers will not be able to indemnify commission ('factoring'), though flexibility is possible in terms of when the advice charge is taken and how (e.g. a percentage of funds or fixed amount). Advisers can access credit but only through a third party.
• Inducements and 'soft commissions' from provider to adviser must be for the client benefit. Any significant benefit (e.g. training) must be widely available and not just for target accounts.
• For group pension arrangements (non-occupational), change is firmly in the FSA's plans. 'Adviser charging' is possible when some form of personal advice is given to members. 'Arranger charging' is being looked at, where a GPP is sold without advice and remuneration is agreed with the employer. This seems close to Factory Gate Pricing options already available.
• Ongoing charges (i.e. trail commission) will only be allowed when there is an ongoing service to the client, except for where a client has an investment to which regular contributions are made. Legacy commission is not permitted.
• A Professional Standards Board – independent from the FSA – has been set up to implement and oversee higher standards in areas of qualifications, ethics and CPD.
• Minimum qualifications for advisers will be at QCF Level 4/Scottish Credit and Qualifications Framework (SCQF) Level 8 or equivalent (equivalent to the first year of a Bachelors degree). For existing advisers, an oral version of the examinations is allowed but will cover the same content. The FSA does not intend this to be a "soft option".
• A new code of ethics is being introduced.
• The FSA is looking closely at how firms will measure adviser performance. They are suggesting it should not be based on appointment to sales conversions or reward for selling one product over another.

We seek to understand your current business processes and goals and to work with you to provide a realistic and effective compliance solution. Our service levels range from remote Suitability Reviews with desk-based guidance through to regular visits where we carry out the tasks of the Compliance Manager and/or T&C Supervisor.

Whatever level of support you are looking for we will be able to provide a quality and affordable solution.

Please contact us for further information.

We have worked closely with Steve over a number of years; he has a professional, expert and focused approach to helping us to a greater understanding of the constantly changing needs regarding our Compliance issues and requirements.

Richard Hall
Director
TCS Life and Pensions