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Retail DistRibution Review


Back to school


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New rules will affect how we pay for financial advice, but they will also have an impact on advisers and providers, as Madeline Thomas discovers


NVESTMENT advice across the UK and the Channel Islands is changing. Financial advisers will have to take account of a new set of rules that will affect everyone from bank customers to those who design investment products – and for many advisers the rules will also mean getting more qualifications. This change – called the Retail Distribution Review (or RDR to those in the trade) – will also set Jersey apart from Guernsey, which has yet to decide whether to adopt the rule, and may affect how investment flows between them. The RDR was first introduced as a study in Britain by the industry’s regulator, the


Financial Services Authority (FSA), back in 2006. It meant the FSA could examine the way in which investment business was conducted, how investments were distributed to consumers, and whether this process needed to be changed to safeguard customers. The issue at the heart of the RDR is the fact that the investment-advice process is rather too closely allied to existing insurance and mortgage business, for example through the payment of commission to advisers on the back of sales. The argument goes further in that the whole process was not as transparent as it could be, and the public might only be getting offered a limited number of


26 businesslife.co December 2010/January 2011


products as a result of advisers being ‘tied’ to certain products. As Jon Pain, Managing Director of


Retail Markets for the FSA, says: “The RDR is about regaining consumer trust and confidence in the retail investment market, building a more sustainable sector and making it easier for people to find their way around and get the help they need – this is more important now than ever before.”


Over the last four years, the regulator has published a series of consultation papers on the subject, which have slowly taken shape to form a framework of rules. In Britain, these will be introduced by 31 December 2012. In Jersey, they will


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