A brief guide to CP09/31 – Delivering the RDR – a few bullets for those who haven’t read the detail…
• FSA has restated that the 2012 deadline for the full implementation of RDR remains
• Some had hoped that more time would be given, especially to achieve the QCF level 4 qualification standard
• Some felt that the potential change of Govt would see RDR dropped or delayed – this is considered highly unlikely
• The proposal for an ‘Independent’ Professional Standards Board’ separate from the FSA has been changed to one that is to be a ‘subsidiary’ of the FSA
• CII and others argue that this limitation of ‘independence’ will reduce the intended increase in public confidence
• Alternative study routes to achieve QCF 4 are now being considered
• In CP09/18, there was talk of an ‘Oral’ route
• May consider ‘coursework’ or ‘practical assessment’, but it is subject to meeting a number of listed criteria, it
must satisfy the qualifications regulator and is still unclear and likely to remain so until the end of Q1 2010
• An ‘independent’ assessment of Competence may be required for advisers who are not a member of a Recognised Professional Body (RPB)
• Will we see a growth in Recognised Professional Bodies (RPBs)?
• RPBs will need to satisfy themselves that its members are competent
• Need to be careful of advisers trying to exploit any standards arbitrage between RPBs
• The FSA has published a list of ‘no regrets’ qualifications
• Still not agreed the ‘benchmark’ qualification but expect this mid 2010
• ‘Gap filling’ between the current qualification and the ‘benchmark’ qualification will be required to be completed before 2012
• FSA acknowledges that ‘consumer awareness’ is likely to see an increase in customer complaints
• Improved financial awareness should reduce ‘ignorant satisfaction’ with inappropriate advice
• TCF and regular customer review assessments should be carried out to identify and address individual or systemic issues early
• Protection business is confirmed as being allowed to operate with commission based remuneration
• ‘Pure protection’ with no investment element
• Need to be careful that ‘specialism’ doesn’t disadvantage advice in other need areas
• Although still seeking feedback, the FSA seems inclined to require the same Professional standards to be applied to Protection Advisers (QCF Level 4)
• The FSA also feels that ‘Adviser labelling’ (‘Independent’ and ‘Restricted’, should also apply to Protection)
• Protection commission needs to be disclosed
• GPP advice will be subject to ‘Consultancy Charging’ previously referred to as ‘Arranger Charging’
• The ‘Consultancy Charge’ is intended to be agreed with the employer for setting up and managing the scheme and it may be paid for by the employer or deducted from the employees GPP funds in a manner and amount agreed by the employer that is disclosed to the employee – ‘Adviser Charging’ may also apply where personal investment advice is given to individual employees
• HMRC will regard ‘reasonable’ (market cost) Consultancy Charging as ‘Scheme Administration members payment’ and not unauthorised deduction incurring tax charges
• A consequence/concern could be for employers to offset the ‘Consultancy Charge’ against the funding level and so reduce the amount going towards pension benefits
• FSA has said that it will not allow factoring by Product Providers in respect of GPPs
• There was a concern that Providers and Advisers could exploit a loophole by selecting ‘Occupational Pensions’ (not covered by FSA regulation) instead of GPPs in order to obtain commission via what is a similar benefit vehicle (differences in benefit and tax treatment were more pronounced prior to Pensions act). The FSA has said that it will seek to ban commission payment on the underlying investments to avoid this being a risk
• GPP product providers estimated between £1m and £10m of costs associated with changing their products to comply with the proposed regime
• FSA has said that it wants to stop commission for ‘Basic Advice’ linked to Stakeholder GPPs