Discussion paper: Some RDR ideas are stirring emotions in the protection arena
The Financial Services Authority (FSA) seemed intent to keep tongues wagging during the summer season and generate a surplus of media coverage surrounding the Retail Distribution Review (RDR) discussion paper that was published in late June, writes Lucy Quinton.
While the RDR is currently causing uproar in the investment market, there is a consensus that it will not be long before it is implemented in the protection industry.
The paper was released around the same time as a consultation paper on insurance conduct of business (ICOB), which has been overshadowed due to the sheer size of the investment market. However, there are parts of the RDR that are intrinsically related to the ICOB review that protection advisers should take note of.
One idea causing uproar is the professional financial planners section, which suggested it should be two types of advisers. The most highly qualified could potentially agree their remuneration directly with the consumer and term themselves as "independent". Other advisers not meeting these conditions may want to seek provider remuneration and would not term themselves as "independent".
Chris Cummings, director general of the Association of Independent Financial Advisers, said that, while the association was in favour of better outcomes for consumers and the positive impact this would have on the industry, the key question was whether consumers would get a better deal if some of the proposals put forward in the discussion paper were implemented.
Cummings also refuted the suggestion that "independence" could be defined solely by the adviser's method of remuneration. An adviser's ability to advise across the whole range of products available on the market with no contractual ties to any providers, should be the reason an adviser is defined as "independent".
However, the Association of British Insurers was positive about the review with Stephen Haddrill, director general at the body, saying: "The FSA's focus on improving professionalism and on making it clearer to customers what they can expect from their adviser is the right one."
Some providers seemed rather more sceptical of such an idea.
Roger Edwards, product director at Bright Grey, wanted to see a period of time for the industry when it could get on with distributing products rather than constantly having to try and re-align businesses. It is supposed to be in customers' best interests but he added there was a need to address other issues such as non-disclosure.
Chris Gillies, managing director of Zurich, intermediary group, applauded the idea that higher standards of training and more transparent forms of remuneration should be rewarded with regulatory incentives. However, the provider is concerned creating new categories of adviser could be confusing for consumers.
Peter Jolly, distribution strategy manager at Standard Life, said the firm welcomed the FSA's encouragement towards greater professionalism and debate and customer-agreed remuneration. There are positive implications for advisers in the financial place to be had.
