The FSA has published a Consultation Paper on its Retail Distribution Review (RDR). The Consultation Paper sets out detailed proposals to implement the wide-ranging reforms outlined by the FSA in November last year.

In Consultation Paper 09/18: Distribution of retail investments: Delivering the RDR (CP09/18) the FSA sets out proposals for:

  • Improving clarity for consumers about advice services - The FSA is proposing changes to make it easier for consumers to distinguish between the different forms of advice on offer to them, with all investment firms clearly describing their services as either 'independent advice' or 'restricted advice'.
  • Addressing the potential for adviser remuneration to distort consumer outcomes - The FSA proposes that all firms that give investment advice must set their own charges, in agreement with their clients, and will have to meet new standards regarding how they determine and operate these charges. The FSA proposes to ban product providers from offering amounts of commission to secure sales from adviser firms and, in turn, to ban adviser firms from recommending products that automatically pay commission. Insurers will need to consider the implications on their systems of these changes.
  • Increasing the professional standards of advisers - The FSA plans to raise the minimum level of qualification for investment advisers and to institute an overarching Code of Ethics and enhanced standards for continuing professional development. The FSA plans to enforce these standards through the establishment of a Professional Standards Board and will consult on this separately in Q4 2009.

The FSA has also published the following externally commissioned research reports which inform the consultation:

  • Retail Distribution Review proposals: Impact on market structure and competition.
  • Describing advice services and adviser charging.
  • Firm behaviour and incremental compliance costs.

The deadline for comments on CP09/18 is 30 October 2009 except for the proposals relating to corporate pensions business which is 31 July 2009.

The FSA will finalise the draft rules in light of the responses to CP09/18 and publish a Policy Statement giving feedback in Q1 2010. The FSA expects that the final timetable for implementation is likely to require firms to implement the changes by 31 December 2012. The FSA will consult on the timetable for establishing an independent Professional Standards Board in Q4 2009.

View Consultation Paper 09/18: Distribution of retail investments: Delivering the RDR, 25.06.09

View Consultation Paper 09/18: Distribution of retail investments: Delivering the RDR, 25.06.09

View Retail Distribution Review proposals: Impact on market structure and competition, 25.06.09

View Describing advice services and adviser charging, 25.06.09