Retail Distribution Review Interim Report

United Kingdom

FSA’s Interim Report on Retail Distribution Review, published today, is the outcome of extensive consultation.[i] The 2007 proposals remain largely intact, although FSA acknowledges that considerable further work is required, and challenges the industry to come up with workable solutions. FSA confirms that the aim of RDR is to enable consumers to have sufficient confidence in the retail financial products market to use it more often, and sees the Interim Paper’s proposals as being conducive to this end.

The proposals in a nutshell

FSA proposes a “simpler landscape” populated by

  • Advisers, who must be independent so that investors can easily distinguish between sales and advice. This is new and controversial, and envisages the elimination of tied advice. It is unlikely to be acceptable to providers.
  • Sellers, who do not give advice. This is a logical development of the “primary advice” proposed in 2007, recognising that you cannot properly advise an investor without going fully into their needs and demands.
  • Money Guidance, which is the new concept of generic advice proposed by Thorensen and intended to address current levels of financial awareness in the general population.

What does FSA want the industry to do now?

  • Providers are to stop determining how distributors are paid
  • The industry to develop a common standard for professional qualifications
  • The industry to work out what rule regime is required for non-advised sales.

What will FSA do now?

FSA wants to review the implications of these proposals in greater detail, including the EU, legal and competition issues. It will publish a Feedback statement in October 2008 covering industry responses – especially to the three challenges – any changes to rules and a timetable.

Please click here for the full interim report.

[i] RDR – Interim Report April 2008