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FSA answers latest FAQs on RDR

FSA Front 480

The FSA has published its latest factsheet on the most commonly asked questions on the RDR asked by advisers at recent FSA events. Here we set out what the regulator has to say on some of the topics that came up.

General:

What are you doing about providers who are stating they will not have RDR ready systems until the third quarter of 2013?

The FSA says providers are not required to offer adviser charging facilitation services, and can choose when to offer them, if at all. It says it is a commercial decision for providers over whether to facilitate adviser charging or not, or limit this to certain products.

Can the FSA be clearer on the position of VAT?

Tax issues are a matter for HMRC, not for FSA. HMRC has provided guidance on various tax issues relevant to the RDR, including VAT.

If I offer a holistic service to clients, do I need to show I receive commission on protection products on my disclosure documents?

Firms which provide advice on retail investment products to a retail client and offer protection products must disclose the commission they receive.

Independence:

I am an advisory firm with a discretionary arm – can we refer clients to our in-house discretionary arm and remain independent?

Independent and restricted rules relate to personal recommendations on retail investment products. Recommendations to a discretionary fund management service, whether in-house or third party, would not normally be considered a personal recommendation if they do not relate to a retail investment product. This means an adviser firm could recommend a DFM service and remain independent without having to demonstrate it has chosen the service based on a comprehensive and fair analysis of the market.

Firms would still need to carry out due diligence on the service it is recommending. The FSA adds if an adviser firm explicitly or implicitly recommends particular funds from a DFM, the adviser firm is effectively recommending a particular investment and therefore the independent and restricted rules would apply.

Adviser charging:

Can we charge for not recommending a product, i.e. advising the client to stay where they are?

The FSA says it is entirely acceptable for advisers to charge for their service irrespective of outcome, such as whether a pension switch happens or not, whether or not an investment bond is bought or where the client decides not to act on product recommendations.

Professionalism:

Can I still talk to clients about the cost of my firm’s services even though I have not yet achieved the appropriate level four qualification?

Advisers who are not yet qualified can still meet with clients to discuss any aspect of their firms’ services provided they are not acting as a retail investment adviser.

The FSA has reiterated various qualification deadlines depending on when advisers were deemed to be competent. Those who were competent advisers, including with any previous employer, on 30 June 2009 need to have stopped giving retail investment advice from 31 December 2012 and should not give advice until they are qualified.

Advisers signed off as competent between 1 July 2009 and 1 January 2011 have 30 months from 1 January 2011 to get qualified.

Advisers signed off as as competent after 1 January 2011, or are yet to be signed off as competent, have 30 moths from the date they started to advise to complete an appropriate qualification. If advisers hold the regulatory module of an appropriate qualification they can give retail investment advice under supervision.

Why do we now have to report complaints on individual advisers?

The FSA is placing more emphasis on the standards expected of individual advisers as part of the RDR.

A “triage” team in the FSA will receive information about individual advisers, assess their risk level and with the supervision team investigate higher risk individuals. The regulator says it recognises individual advisers may not be at fault even where a complaint is upheld, but it says supervisory or enforcement action will be taken against individuals and firms where appropriate.

The FSA will publish a third and final RDR FAQs document later this year.

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Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Nicholas Pleasure 28th February 2013 at 2:01 pm

    Here’s my RDR question for the FSA…

    When are you going to admit that the RDR has made life harder for advisers AND consumers, has pushed up the price of financial services and has removed the availability of advice from most people.

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