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30 April 2012

FSA publishes RDR Newsletter April 2012


This newsletter covers RDR readiness, clarifies the 30-month rule, and recaps on the FSA's latest policy updates regarding the RDR.

Research on RDR readiness

As part of the regulator's wider work to prepare for the RDR, it has carried out research to track how advisers are progressing with the professionalism requirements; this updates the survey from last summer. Some of the results showed:

  • the proportion of advisers with an appropriate qualification has increased from 50 per cent (in summer 2011) to 71 per cent;
  • 93 per cent of advisers are still on track with their prediction to complete the appropriate qualification in time; and
  • gap-fill is an area that many advisers are now turning to. 67 per cent of advisers need gap-fill and, of these, to date 39 per cent have completed it while 42 per cent are in the process of doing so and 19 per cent are yet to start. Fewer advisers (12 per cent) wanted gap-fill clarification compared to last summer (23 per cent).

The FSA says it is important that advisers now press on and achieve an appropriate Level 4 RDR qualification considering any gap-fill requirements, then obtain a Statement of Professional Standing (SPS).

Clarifying the 30-month rule

Responding to requests from advisers, the regulator confirmed that the 30-month rule applies to most but not all RDR activities. The FSA expects this will only impact a small number of individuals but asks them to get in contact if it causes any concern. For most activities, a retail investment adviser must attain an appropriate qualificationwithin 30 months of starting to advise. The 30-month rule does not apply to advisers who intend both to advise on and deal in securities and derivatives because they cannot start these activities until they have completed all of the modules of their qualification. For all other activities (other than an overseeing activity), the 30-month time limit starts when the trainee starts the relevant activity and is working under supervision.

Assessing suitability

One of the risks covered in The Retail Conduct Risk Outlook (RCRO) is the transition to the RDR. The FSA said that firms may look to maximise their recurring revenue streams ahead of the RDR and that, in some cases, it may adopt centralised investment propositions (CIPs) such as portfolio advice services (facilitated by platforms), using Distributor Influenced Funds (DIFs) or creating other ties with discretionary managers.

The FSA has reviewed this, and a guidance consultation called ‘Assessing suitability: Replacement business and centralised investment propositions’ shows the results, outlining the regulator's findings and giving examples of its concerns around CIPs. The report also covers suitability failings of wider relevance that the FSA found in relation to replacement business.

Newsletter

Guide - Is your firm on track?



© FSA - Financial Services Authority


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