27 Jun, 2007
Retail Distribution Review
The FSA has published the First Discussion paper on the Retail Distribution Review and is inviting comments from interested parties by the end of the year.
The FSA are interested in out puts and are looking at ways to improve quality and access to advice and products.
The proposals include segmenting the market (again) with different classes of adviser being established.
Professional financial planners will be expected to have achieved standards akin to 'Chartered' status, 'Certified' status, or something similar. The remuneration practices will need to operate in a way that effectively reduces any conflicts of interest - by agreement with the customer and not influenced by the product provider.
The proposals also suggest that the term "independent" would be restricted to businesses where remuneration is agreed with the customer – whether by traditional fees, annual management charges, or something like Customer Agreed Remuneration.
The other type of full adviser would be a "general financial advisers". Probably less qualified than a professional financial planner, the FSA would expect that the current mimimum requirements would still have to increase - so more than just FPC III and a need to sign up to an ethical code of a professional body.
General Financial Advisers may be paid by fees or commission and the FSA are looking at ways to reduce any risks that arise from this type of remuneration. This class of adviser may not use the term "Independent".
A further Discussion paper is to be published on the matter next month - which may lead to higher minimum capital requirements and/or increased supervision.
The FSA would also like to see the costs of distribution cut so that consumers on low and middle incomes can afford to obtain financial advice. This would require the development of alternative, less complex advice (sounds a bit like stakeholder to me). This may be described as "Primary" advice.
Primary advice could be a new type of regulated advice service covering a broad range of a consumer's needs. Such advice might point the consumer towards a limited range of savings, investments and possibly protection products that would be broadly appropriate for that consumer. This will be of particular interest to the Bancassurers.
As a trade off, the FSA may consider removing any price charge capping (how can this be TCF?).
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