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The faqs on the RDR

The FSA has published guidance based on the most frequently asked questions at its recent RDR roadshows. Here is a summary of the regulator’s responses

Q1: After 2012, can someone who does not have an appropriate RDR qualification carry out a fact-find or other client-related activities?

A: Yes, as long as the individual is not making a personal recommendation or advising on the merits of buying or selling a particular investment.

Q2:In preparing to meet the professionalism requirements, how should advisers expect to get help from accredited bodies?

A: Accredited bodies will help firms meet the professionalism requirements and will issue statements of professional standing. Firms must obtain an SPS for each retail investment adviser from the end of 2012. Accredited bodies will be expected to:

1: Check that advisers hold an appropriate qualification and verify their gap-fill

2: Verify that advisers have declared that they have complied with the statements of principle for approved persons and have a code of ethics that does not conflict with the statements of principle for approved persons

3: Suggest suitable CPD activity, verify that advisers have declared they have completed their CPD and carry out random, 10 per cent sample checks

4: Recognise CPD activity from a range of providers, including firms’ own in-house schemes.

Accredited bodies will also be expected to alert the FSA to any issues they become aware of with individual advisers.

Q3: What is structured CPD?

A: Structured CPD is designed to achieve a defined learning outcome and is capable of being independently verified. Examples of structured CPD activities include participating in courses, seminars, lectures, conferences, workshops, web-based seminars or e-learning, which requires a contribution of 30 minutes or more. While structured CPD can include reading, we only expect it to be used in a minority of ongoing CPD activities.

Q4: If I consider a product but I do not feel comfortable recommending it due to its risky nature, can I still call myself independent?

A: A firm may take the view that certain products are not suitable for their client base. For example, firms may consider unregulated collective investment schemes too risky for the clients they usually deal with and we would not expect a firm to recommend these just to prove their independence. However, a firm should be aware that there may be some clients who these products are suitable for and should be able to recommend them when that is the case.

Q5: If a firm has three restricted advisers but as a team they can advise on all retail investment products, can it hold itself out as independent?

A: No. No one in a firm that holds itself out as independent should make a personal recommendation to a retail client unless that personal recommendation is based on a comprehensive and fair analysis of all retail investment products in the market.

Q6: Where a limited company has “independent” in its registered name but will not offer an independent service in the future, will they need to apply for authorisation again?

A: No. Where a firm is simply changing its name, it only needs to complete a standard data change form.

Q7: What is meant by relevant market in the context of independent advice?

A: To use the example of ethical products, for clients who only want these, it is clear that non-ethical products would never be suitable for them. Therefore, the relevant market for these clients would include all ethical retail investment products.

Q8: If I charge 1 per cent for a £50,000 investment and 1 per cent for a £250,000 investment and the work is the same, am I not going against the principle of treating customers fairly?

A: The charge should reflect the service provided. It is up to the adviser whether they charge a flat fee, hourly fee or percentage but it must be agreed with the client.

Q9: We can only receive an ongoing income for an ongoing service after the RDR. I have agreed a service level with some of my clients, which involves them being “on the books” and I am available on a reactive basis. Is this acceptable?

A: Where the ongoing charge is for an ongoing service, it is up to the adviser and client to agree the ongoing service and the charge. The service must be a genuine service, not just a vague statement that the adviser is available at any time. It is also acceptable, where a recommendation is for a regular payment product, that the adviser charge can be payable over time without further ongoing advice.

Q10: If my firm does not employ a pension transfer specialist, does that mean my firm cannot hold itself out as independent?

A: A firm can be independent even if they do not have a pension transfer specialist. However, all qualified advisers should be able to identify clients for whom a pension transfer or opt-out may be suitable and refer clients to a specialist.

For the full guidance, visit: http://www.fsa.gov.uk/pubs/guidance/gc11_20.pdf

Advisers can email their responses to: karen.hender@fsa.gov.uk until September 22.

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