Retail Distribution Review (RDR)
The Retail Distribution Review has fundamentally changed:
- how investment products are made available to retail customers in the UK; and
- how firms acting as client advisers, product providers and platform operators undertake their business.
For firms that are involved in this market in any way, the RDR requires significant changes not only to compliance procedures and controls but also to business models and structures. Firms should now have a clear understanding of how the different strands of the RDR will apply to their businesses and should have implemented the measures that they need to take to ensure their compliance with the new requirements.
In developing the RDR, the FSA's primary objective was to restore consumer confidence in the savings and investment market – so that, when a consumer receives advice on investment products, he can be assured that that advice is driven by what is in his best interests and not by what benefits the adviser or the product provider.
As a result, the RDR focuses on four key elements:
- adviser charging – ensuring that advisers are paid for their advice by their clients and not by the providers whose products they recommend;
- adviser status – ensuring that clients understand the nature of the advice they receive, i.e. whether it is independent (covering all types of product from a wide range of providers) or restricted;
- professionalism – ensuring that individual advisers are subject to enhanced qualification, training and ethical standards on an on-going basis; and
- platforms – ensuring that the operation of facilities such as fund supermarkets does not distort the advice market by, for example, enabling advisers and product providers to avoid RDR requirements.