Catalysing industry and regulatory change so more consumers buy what they need and have confidence in the products they hold and in the advice they take.

We launched the Retail Distribution Review (RDR) in June 2006 to address the many persistent problems we had observed in what is now, over 21 years of regulation of the retail investment market. Insufficient consumer trust and confidence in the products and services supplied by the market lie at the root of what we are seeking to address.

In launching the RDR, we decided to go beyond simply treating the symptoms of these problems and sought to address the root causes.

The RDR is therefore one of the core strands of our retail market strategy. It complements our aims to improve consumer capability and further ensures firms deliver fair outcomes for consumers. It is essential for promoting a resilient, effective and attractive retail investment market. The RDR will modernise the industry, giving more consumers confidence and trust in the market at a time when they need more help and advice with their retirement and savings planning.

We have used the RDR to address the root causes of some long-term problems with how the market operates, and at the same time to prepare the market for the future. In doing this, we have taken a different approach to previous policy initiatives. We spent two and a half years seeking input from a wide range of industry practitioners, consumer representatives and other stakeholders to get their views on the issues to be addressed and to identify potential solutions. We are enormously grateful to all those who have contributed considerable constructive energy to this review. They have helped us to identify and develop ideas, giving us feedback along the way to raise our awareness of the likely impact of our proposals. This means that we now have a very clear view of how the market will react and where our regulatory interventions are most needed.

In CP09/18 we set out three measures that we regard as most fundamental to delivering the desired market outcomes that and which will materially alter and improve the interactions between consumers and the industry. These are to:

  • improve the clarity with which firms describe their services to consumers;
  • address the potential for adviser remuneration to distort consumer outcomes; and
  • increase the professional standards of investment advisers

In March 2010 we published PS10/6 which contained our final policy for the first two elements. In June 2010 we published CP10/14 containing our latest proposals for the third element, professional standards of advisers. In DP10/2 and CP10/8, also published in March 2010, we are consulting on the RDR implications for platforms and pure protection products. We have set our rules on group personal pension in PS10/10, which will see the removal of commission and introduce 'consultancy charging'.

The new framework will come into effect at the end of 2012 and will apply to all advisers in the retail investment market, regardless of the type of firm they work for (e.g. banks, product providers, Independent Financial Advisers or wealth managers).

The changes are far-reaching and challenging. We know that there will be concerns about introducing such significant change at a time of market turmoil and uncertainty. However, given the market’s appetite for change that became increasingly evident during this review, and the progress that many have made already to move in the direction we are proposing, we believe that we are right to set out our final proposals for consultation now and give the market sufficient time to implement the changes. The RDR provides a golden opportunity to re-build the confidence and trust of consumers at a crucial time.

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