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PIMS 2011: FSA concerned over RDR transition risks

The FSA has told advisers it is concerned about the risk management practices of some firms who transition too quickly to abide by the retail distribution review requirements.

Heron House Financial Management managing director Saran Allot-Davey says the FSA has highlighted to her that it is concerned that firms who move to a new business model in line with the RDR may not be taking full account of the risks of this new model.

Speaking aboard the Aurora at the PIMS conference in a session about investment processes, Allot-Davey said: “An area the FSA has mentioned to me as a concern is the risk management oversight in firms. As firms transition from the old model to the new model, if they are transitioning quite quickly these firms can end up an incredibly different firm from where it started.

“Therefore the FSA wants to see that the firm is sitting down and thinking about what the changes are to the business model, what the new threats and risks are to the firm, and how it is going to deal with those.”

The FSA warned about the emerging risk of firms transitioning to the RDR in its Retail Conduct Risk Outlook document in February.

The regulator said it was concerned that if providers choose to offer larger commission and advisers look to maximise recurring revenue before the RDR is implemented, this could result in unnecessary churn and excessive consumer costs.


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. This is rediculous 20th May 2011 at 1:23 pm

    Do you need permission to go to the toilet now, too?

  2. The FSA has is concerned about the risk of transition too quickly to abide by the retail distribution review requirements.

    Der – do we have a choice?

  3. New Model Adviser 20th May 2011 at 1:39 pm

    The FSA are right to flag this as transitioning is extremely painful and could take up to four or more years to complete.In the meantime as the deadline looms the pain curve is ever steeper for those yet to embark on transitioning. Keeping overheads tightly controlled and securing a line of credit are essential to make it work.

  4. Simon Mansell 20th May 2011 at 1:39 pm

    It was Martin Luther King who wrote his iconic ‘I have a dream’ speech. Well I don’t have a dream I have a concerns and thet concern is even greater that the regulators!

    My concern is that the regulator has failed to consider the danger of adviser charging limiting access to advice for those on lower incomes. My further concern is directed at the loss of 30% of IFA firms and the millions of orphaned clients that will result!

  5. FSA concerned over RDR transition risks

    Not as much as we are!

  6. is this some kind of joke??

  7. We already had an RDR model – we were adviser charging before the RDR was written. And it was a better model – it takes account of existing trail. Then the FSA came along and have screwed it up! You cannot mitigate for FSA putting their nose in things and expecting us and our clients to foot the bill.

  8. As I have said TIME & TIME again, the RDR’s stated aims are not the problem, it is the combination of everything being expected to come together on the same day which is.
    Originally it was stated the FSA would not be pushing the RDR agenda and timeline, it would be something for teh industry to take forward itself. It has now morphed in to a cliff edge which all must happen on the same day with no gradual incremental steps and no mechanism to reverese anything if it does NOT WORK.
    This is exactly why the referendum on the change to the voting system failed (from my client feedback) as I know a lot of people who would have voted for it, had it had a (think this is right) twiligiht clause in case it didn’t work. Very much like the EU and Euro, we’re all stuck in things whetehr we like it or not if we are not careful and the only way out then becomes revolution.

  9. john joe mcginley 20th May 2011 at 8:48 pm

    Business transition can be daunting and it can be helpful to stick to a defined process. Our free website can help you on this journey

    Remember loads of free support is available from a variety of sources

  10. We’ll all go out of business transitioning more slowly so as not to worry the FSA, but the useless morons in Canary Wharf will keep on taking their high salaries, bonuses, pension schemes and expense accounts.

  11. Exasperated Me 23rd May 2011 at 10:26 am

    “As firms transition from the old model to the new model, if they are transitioning quite quickly these firms can end up an incredibly different firm from where it started.”


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