The Retail Distribution Review (RDR) comes into effect at the end of 2012. The changes for the financial industry are far-reaching and challenging. We look at what they will mean for consumers and how Coutts is preparing for this important initiative.
A quick look at the Financial Services Authority (FSA) website on this subject will show you how much importance is being placed on this by the regulatory body. The RDR forms part of the FSA's drive to give consumers greater confidence and trust in the financial products they hold and the advice they are given.
A huge amount of research was undertaken by the FSA to learn how consumers felt about the financial market. As a result of this, the following three key points were identified:
One of the outcomes for consumers is that the cost of advice will be separated from the cost of the product, and the cost of advice will have to be set out upfront and agreed with the client.
Additionally, there needs to be a distinction between 'independent advice' and 'restricted advice' services. Anyone describing their advice as independent must consider all products and providers that could meet a client's needs and so consider all relevant options, free from any restrictions or bias when making recommendations.
We are considering our advice processes and will make a decision on the services we will offer from 2013 over the coming months, but we remain well on track to have made the changes required under RDR by the end of next year.
With regard to professional standards, the FSA want to raise these and require all investment advisers to be qualified to a new, higher level. The minimum benchmark qualification for all advisers that provide investment or financial planning advice is set to a minimum of Qualification & Credit Framework (QCF) level 4 by the end of 2012.
We commend the efforts of the FSA to increase professionalism within the industry. As we want highly-qualified staff, most of our advisers are sitting a level 6 qualification - Private Client Investment Advice and Management (PCIAM) through the Chartered Institute for Securities and Investments - which will exceed the RDR requirements.
We have over 100 advisers who have already passed the PCIAM and our results have been impressive, with many achieving distinctions and merits. Our pass rates at the last sitting were 83% compared to the national average of 68%. Between now and the end of 2011, about another 100 staff will sit PCIAM and we expect equally impressive results from them.
