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Retail Distribution Review (Six objectives (An industry that engages with…
Retail Distribution Review
Introduced by the FSA which became effective from December 202
A set of rules intended to introduce more transparency and fairness in the finance industry
Financial advisers are no longer permitted to earn commissions from fund companies in return for either selling or recommending their investment products
Investors have to agree fees with an adviser from the outset
Investors should receive a simple document setting out both the advice charges as well as those for managing their money
Financial advisers would offer either independent or restricted advice and would have to explain the difference between these two types to their client
Independent
Will be given by an independent financial adviser who will be able to advise on all investment and pension products and will also be able to recommend products from across the entire market
Restricted
Will offer a more limited service
These changes will bring the rest of the investment industry in line with common practice in the exchange traded fund industry - one of the reasons why ETF providers have been able to keep costs low is by not paying commissions to advisers
Should also enhance standards across the board with all advisers whether selling one company's products or qualified independent financial advisers, who are required to gain additional qualifications and complete continuing personal developed training each year
There are a number of key issues
Concerns that this attempt to improve standards may see some potential investors excluded from financial advice altogether. Those on lower income will not be able to afford the costs of the better and more qualified independent financial advisers. This situation has been exacerbated because many of the main UK banks will no longer provide any investment advice
Consumers may have to decide themselves what product they require
May also be confusion as to what to type of advice the consumer is receiving - whether independent or restricted
Six objectives
An industry that engages with consumers in a way that delivers more clarity for them on products and services
A market which allows more consumers to have their needs and wants addressed
Remuneration arrangements that allow competitive forces to work in favour of consumers
Standards of professionalism that inspire consumer confidence and build trust
An industry where firms are sufficiently viable to deliver on their long term commitments and where they treat their customers fairly
A regulatory framework that can support delivery of all these aspirations and which does not inhibit future innovation where this benefits consumers