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Stress test is needed to make sense of RDR

The retail distribution review needs to be reassessed as a matter of urgency because of the impact of the global economic downturn. That is simple common sense and it is time that the regulator applied some common sense.

The world seems to change almost every week and the economic situation is grim. As such, a reform that was testing, to say the least, may be fatal to many advice businesses.

It does not mean that the aims or even the end-point of much of the RDR needs abandoned but all its measures need to be stress-tested for their impact in the context of the current economic situation. This is the least that the FSA can do.

Any changes, whether to timetable, or to the conditions of the review, would not be a U-turn or retreat. They would be nothing more than a sensible adjustment that preserves an essential part of the financial services infrastructure.

There should be a compromise on supervision of older advisers, an easing of the capital requirements and easing of adviser-charging to allow factoring for a transition period at least.

Factoring should be allowed permanently if the FSA can find a way to eliminate provider bias, which Aifa claims to be the case. In this way, the RDR would become a practical reform with a good chance of success, not a theoretical one that should not be applied to a real market and one which might eventually fail in its goals because of its destructive impact.

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