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Retail DistRibution Review

Jersey’s advice community meanwhile may be better prepared than some mainland firms in its drive for professionalism, despite the fact that Britain will introduce the RDR rules a year earlier. CPD on the island has long been compulsory rather than recommended, and Jersey has kept professional standards in the industry high with its Investment Business Law. Indeed, Sayers cites Jersey’s higher levels of professionalism as a key reason why the JFSC decided to press ahead and implement the changes. The decision means there will be no opportunity for regulatory arbitrage between the UK and Jersey, ensuring the island retains its reputation as a jurisdiction that follows global best practise.

“Advisers will need to have achieved a minimum standard – the majority of routes to RDR compliance will require taking more than just one examination”

causing some considerable consternation with some ‘traditional’ investment advisers.” “Advisers will need to have achieved the minimum standard of an OfQual-approved Level 4 qualification,” explains Kleber Chapon, Programme Manager, Financial Services, at BPP Professional Education, who are offering RDR courses. “These qualifications will cover core subjects, such as regulations, ethics, tax, investment and risk, and specialised topics relevant to the nature of the adviser. The majority of routes to RDR compliance will require taking more than just one examination.”

Finally, Jon Pain stresses that it is not just advisers and the public that are affected. “[It needs] to be clear the RDR applies across the marketplace, and not just distribution – IFAs, fund managers, banks, private banks, insurers and many others all need to be thinking about what impact the RDR will have on their products. Firms operating in the retail distribution market will all have to prepare

their business for the changes. While the intended aim of the changes is clear, the effect on business strategy, distribution, product design, systems and the bottom line is less so. Firms need to assess the costs and any opportunities now by working through the challenges.”

Going forward

So, how is Jersey’s financial community placed to deal with the changes? The Jersey President of the Chartered Institute of Securities and Investment, Richard Sayers, believes Jersey’s decision to implement the rule changes in 2014, currently ahead of any announcement from Guernsey, may help it in it the battle to win quality offshore business.

“Being the first mover has its advantages and disadvantages. Jersey could benefit from a flight to quality as clients require the highest standards of regulation. However, there is also the possibility that business will go to a cheaper source,” he says.

28 December 2010/January 2011

So far, so good. However, the changeover will not be without some upheaval for Jersey business, as firms in Britain have already discovered. The biggest impact for those advising on investments is not increased professionalism, higher standards or even any perceived drive to fee-based advice; it is the drive away from financial advisers altogether in favour of discretionary fund managers. Andrew Rainey, an Independent Financial Adviser with Throgmorton says that while the changes were welcome and indeed necessary from a consumer point of view, the way they were being implemented meant that it was becoming too onerous for generalist advisers to conduct investment business. “Much of investment business is likely to be best left to discretionary fund managers. They already fulfil RDR requirements. The paperwork for normal advisers can be, frankly, more trouble than it’s worth. I am starting to wonder how much investment business I’ll be doing from 2012.”

Should this serve as a warning to Jersey advisers set to follow suit a year later? Sayers believes that, while the RDR will undoubtedly affect the financial landscape of Jersey, possibly forcing consolidation within smaller players in the market, bouncing back from the credit crunch remains the island’s number one economic priority. “I’d say our first priority is to come out of the credit crunch unscathed,” he said. “We may have seen high-street closures at half the rate of those in the UK, but we’re still feeling it. Implementing the RDR is effectively a second priority for us.” n

MADELINE THOMAS writes for the Observer and Independent on Sunday. Additional material by Nick Kirby

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