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 the changes that we are now proposing, including draft Handbook text to deliver these changes. This consultation period for CP09/18 is now closed. We have also set out our policy statement and feedback on changes to the prudential requirements for personal investment firms.

CP09/18 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 December 2009 we published CP09/31, 'Delivering the Retail Distribution Review: Professionalism; Corporate pensions; and Applicability of RDR proposals to pure protection advice'. This paper delivers on commitments made in CP09/18 to cover remaining areas of the RDR. On professionalism, the changes are designed to create a framework that will make individual investment advisers more personally accountable for their knowledge, skills, and professional conduct. We also give further clarity on qualifications to help investment advisers with transition to the future standards. Our work on corporate pensions is aimed at product providers and adviser firms involved in manufacturing and distributing group personal pensions and associated products. Finally, the pure protection section sets out our thinking on the scope for extending the RDR proposals to pure protection advice and identifies areas for future consultation."

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.

We encourage firms to respond to the latest consultation, which is open until 16 March 2010.

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