By Daniel Hunter
The Financial Conduct Authority (FCA) has published an early review of how advisory firms have implemented some of the core aspects of the Retail Distribution Review (RDR) months after its implementation.
The RDR came into effect in the New Year and made significant changes to the investment advice market. RDR made clear how much consumers pay for financial advice, what they pay for, and improved professional standards by introducing a minimum level of qualification for all investment advisers.
Undertaken between February and April 2013, the research published today looks at how advisers had implemented some of RDR's requirements. It found that the majority of firms have made progress and there was a willingness to adapt to the new rules.
However, there were some common issues:
- Providing charges in percentages, rather than cash terms, which some consumers found confusing;
- Firms describing themselves as independent but in fact choosing products from a limited number of providers or products; and
- Not clearly explaining what service customers will receive for on-going fees.
The review is the first of three planned over the next year to assess what progress advisory firms are making to meet the new RDR rules.
"RDR was a major policy development, so it's right that we are acting on behalf of customers to see whether the significant changes are working for them," Clive Adamson, director of supervision at the FCA, said.
"The research for this report was undertaken just a few months after the implementation of RDR, so provides an early snapshot of what has changed. This early view shows that, while firms have acted, they still have more to do to if a customer is going to be in the best possible position to understand the price they will pay and the service they will get for that price.
"Firms should carefully consider the feedback covered in this report. We strongly encourage advisers to look at the examples highlighted, and take immediate steps to help their customers better understand the charges and services being offered."
Published at the same time is research commissioned by the FCA, which looks at how effective the documents and materials produced by firms are at helping consumers understand the charges they will pay and the service they will receive. The research reinforces the need for firms to provide clear and concise information if consumers are to understand and, crucially, compare services and prices. The FCA is also sending a factsheet to over 6,000 advisory firms to help them assess whether the common issues found apply to them.
The FCA has an overarching strategic objective of ensuring the relevant markets function well and to support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
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