Delivering the RDR
Professionalism, Pure Protection and group Personal Pensions
The RDR presents significant opportunities for firms and individuals in the retail investment market to build trust and confidence by modernising practices, raising standards and putting the interests of their customers first.
Our Consultation Paper (CP), CP09/18 set out the changes we proposed for adviser remuneration, a description of the advice services that can be adopted and standards of professionalism. The paper also outlined our early thinking on pure protection and group personal pensions.
Our follow-up CP, CP09/31 provides further clarification for investment advisers on what is required of them to meet the deadline for the new, higher level qualifications and an overview of the proposals on the governance of professional standards and the role of the professional bodies.
Below we outline what you, as investment advisers, need to know and what you need to act on now to meet the end of 2012 deadline.
Professionalism
Raising professional standards is key to building investor trust and increasing people’s engagement with the industry. Our proposals include a requirement that all existing investment advisers will need to be qualified to a new, higher level by the end of 2012.
If you are an existing adviser assessed as competent on 30 June 2009, you are subject to our end-2012 deadline to reach Level 4 standards. Existing advisers should take full advantage of the transitional arrangements for qualifications. This means that they can use current qualifications that are on the FSA’s transitional qualification list (see Section 2 Chapter 3 of CP09/31) to meet the new standard, and any gaps between these qualifications and the new examination standards can be met by way of continuous professional development (CPD) rather than further exams. We set out in CP09/31 our guidelines for CPD top up.
We encourage advisers who have not yet gained a Level 4 qualification to start studying now, rather then wait for the new qualification to become available. CP 09/31 sets out the qualifications that currently meet Level 4 standards.
CPD top-up does not mean that you have to take further examinations to reach Level 4. You can use the guidelines for CPD top up to identify and record your CPD top up. This can consist of, for example, attending seminars, lectures, conferences, completion of appropriate e-learning, tutorials and workshops or courses.
New entrants to the investment advice sector after 30 June 2009 are still subject to the Level 4 requirement but do not have to meet the end 2012 deadline. We will introduce new rules that will limit the time new advisers have to meet the qualification requirements
Group Personal Pensions (GPP)
We are seeking to remove commission bias from the group personal pension market - recommendations made by advisers will not be influenced by product providers
We will also make adviser charging more transparent - advisers will have to fully disclose how they will be remunerated and employers will negotiate and agree the cost of the adviser’s services upfront. We believe that employers would be more engaged with the level of adviser remuneration if they were given transparent information on the overall amount an adviser will receive on the GPP as a whole.
Pure Protection
In CP 09/18 we asked for views on the risks to consumers if we implemented the RDR proposals for investment advice but not for pure protection advice.CP 09/31 summarises the feedback we received and provides an update on our views on the scope for extending RDR approaches to pure protection.
We think that there may be scope for applying RDR adviser service labelling and correspondingly raising the advice standards that we require for those advisers calling themselves independent. We expect to consult on this in the second half of 2010.
We do not think that adviser charging is the right approach for pure protection advice, however, we do think that there is a case for requiring commission disclosure where pure protection is sold alongside investments. We will consult on this in March 2010.
In CP 09/31 we ask for views on the possible extension of RDR approaches to increasing professionalism amongst pure protection advisers.
More Information
Factsheet: Improving your understanding of the RDR – Professionalism
Bookmark page