The retail distribution review was launched by the FSA in June 2006 fundamentally to reconsider how investments were distributed to retail consumers in the UK, with an implementation date of December 31, 2012.
Through the RDR process, the FSA believes that it has identified the various long-standing problems that impact on the overall quality of advice and restrict consumer confidence and trust in the UK investment market and together with initiatives such as treating customers fairly, the RDR is designed to tackle the major shortcomings identified within the existing regulatory framework.
The RDR is designed to ensure that:
- Independent advice is truly independent and reflects investors’ needs. l People can clearly identify and understand the service they are being offered.
- Commission bias is removed from the system and recommendations made by advisers are not influenced by product providers.
- Investors know up-front how much advice is going to cost and how they will pay for it.
- All investment advisers will be qualified to a new, higher level (to at least level four on the qualification credit framework).
The Isle of Man Financial Supervision Commission, the Isle of Man’s financial services regulator, is presently implementing a consultation on whether a similar review is needed, including establishing a forum comprising of professional body representation, including the Chartered Securities and Investment Institute together with the island’s Financial Planners and Insurance Brokers Association, to ensure the subject is fully consulted on within the context of the island’s requirements.
The FSC is aware that there are varying opinions with regard to certain aspects of the UK RDR, initial feedback on the Isle of Man has been positive with regard to the intent of raising standards and elimination of misselling.
Potential changes to the island’s regulatory environment could include finance professionals offering investment advice potentially having to gain new, higher levels of qualifications. There may also be a change in the way fees and commission are paid and the topic of grandfathering would need to be resolved.
The Isle of Man is committed to maintaining its reputation as a well regulated financial centre. The FSC sees it as crucial that the merits of implementing an RDR-type regime is fully considered.
For instance, while the island sees it as crucial to negate any opportunity for regulatory arbitrage between the UK and the Isle of Man in order to protect the island’s status and reputation as a jurisdiction that follows global best practice in financial regulation. Similarly, the island is distinct from the UK and the impact of changes to the regulatory framework against the backdrop of the island’s industry must be fully appreciated.