The Treasury Select Committee ("the Committee") published a report on its inquiry into the Retail Distribution Review ("RDR") on Saturday, and recommends that in order to allow advisers to satisfy the requirements of the RDR, the FSA should defer its implementation for 12 months.
The Committee agrees that reform of the financial advice market is needed, but believes the FSA's current timetable risks putting a large number of experienced advisers out of business, potentially reducing competition and choice for consumers, at a time when the savings rate is too low.
In its response, the FSA has said it remains committed to the January 2013 date, and noted that "many of the report’s recommendations relate to the importance of monitoring the market place to ensure that the RDR’s goals are being achieved. The FSA is committed to ongoing monitoring and recognises that it is important that its proposed successor organisation, the Financial Conduct Authority, continues this work."
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Key Committee recommendations:
- A 12 month deferral of the introduction of the RDR
- Retention of the level 4 requirement, but with leeway provided through a system of proper supervision (and the additional year)
- A grandfathering process giving flexibility for advisers on a case-by-case basis
Further and ongoing work by the regulator, focusing on:
- explaining to the public the change in labelling of advice as 'restricted' or 'independent'
- analysing the impact of the removal of trail commission
- the impact on vertically integrated firm's remuneration structures
- the merits of any move to a Level 6 requirement
- progress on a regime for simplified advice
- pre-implementation churn, post-implementation holding of clients
- reviewing the impact of the RDR on adviser levels, and savings through independent financial advice
- scrutinising operations passporting into the UK in areas of activity covered by the RDR
- how to allow High Net Worth individuals to opt out of the requirements of the RDR
- the impact of the imposition of VAT on the provision of financial advice
- HM Treasury to confirm whether RDR is consistent with the FCA's proposed objectives
- An inquiry by the Committee as to the accountability of the FCA
- Consideration of the reintroduction of a long-stop on the liability of advisers, if in the interests of consumers