Delay to RDR likely to benefit investors, it is claimed

The Association of Independent Financial Advisers (AIFA) has backed the UK’s Treasury Select Committee report into the Retail Distribution Review and its recommendation for a 12 month delay to its implementation.

The removal of a cliff edge date, will ensure more investors will be able to access advice in the short and medium term, according to Stephen Gay, director general of AIFA.

‘We hope the regulator responds positively to these sensible proposals. At the heart of RDR is the end consumer, who needs advice, and the Committee has rightly put the focus back on them. The recommendation to remove the cliff edge date for qualifications, and consider cases on an individual basis, has been a key AIFA suggestion, and one which will maintain maximum access to experienced advice,’ he said.

‘The Committee also echoes many of the risks identified by AIFA. The move to adviser charging is positive, but one which will require significant industry effort and a pragmatic time-scale is paramount, particularly as the detailed workings are still to be established. In addition we believe the Committee should have called on the Office of Fair Trading to consider industry-wide discounting rates to allow provider factoring,’ he explained.

‘AIFA was particularly pleased to witness the Committee's desire for a level playing field. The risks posed by vertically integrated firms are a clear and present danger, and we support the Committee's call for an annual report by the Financial Services Authority, and its successor body, on this point,’ he added.

AIFA is already working with HMRC to develop both AIFA, and subsequently HMRC, guidance on VAT in adviser charging, a key area of concern among advisers and raised by the Committee.

The Financial Services Authority (FSA), the UK’s financial watchdog, also welcomed the report published by the Treasury Select Committee. ‘The FSA recognises that the RDR is a significant structural change for the industry and therefore it is right that this is subject to careful scrutiny,’ a spokesman said.

The report is supportive of the general intentions of the RDR which aims to improve the quality of the market place and the advice given to consumers. In recent years, mis-selling scandals and a lack of consumer trust have severely damaged the reputation of the retail investment market. Mis-sold personal pension and endowment policies alone have led to nearly £15 billion having been paid in compensation.

But it believes the implementation should go ahead from January 2013. ‘The RDR is already a long running initiative. There is clear evidence that the industry is well advanced in its preparations, with 49% of IFAs already qualified and at least 82% expecting to remain as retail investment advisers,’ the spokesman explained.

‘Many of the report's recommendations relate to the importance of monitoring the market place to ensure that the RDR's goals are being achieved. The FSA is committed to ongoing monitoring and recognises that it is important that its proposed successor organisation, the Financial Conduct Authority, continues this work,’ he added.

The FSA will provide a formal response to the TSC in due course.