The Financial Services Authority (FSA) has kick started the second stage of its thematic review into the implementation of the retail distribution review (RDR), sending out a questionnaire to 50 advice firms asking them about adviser charging and how they describe their services.
The FSA previously set out plans to conduct four thematic reviews in 2013 to focus on professionalism, non-advised sales, charging structures and description of advice.
Rory Percival, FSA technical specialist, said the regulator will now conduct the reviews into charging structures and description of advice together as they are heavily interlinked.
Following the questionnaire, which has been sent to a sample of 50 firms, around 20 firms will be chosen for more detailed visits, interviews and file assessments.
The file assessments will not be designed to scrutinise suitability, but if failings are apparent firms will be flagged for further investigation.
Percival (pictured) said: ‘At this stage, the first cycle which will take six months, is very much being supportive of the industry in providing these good and poor practice examples to help the industry move forward and embed the rules appropriately. The focus is on being supportive.’
‘This is very much in the new vein of acting early to prevent risks from crystallising…. We want to find out what firms are doing, provide as many poor practice examples as early as we can to help the industry apply the rules appropriately.’
However, he added that during the second and third cycles, which are also due to take six months each, the FSA will expect firms to be much more compliant with the rules.
Percival also wanted to clarify that the FSA will be checking adviser charging for its disclosure not on its value for money.
‘The focus is on disclosure. Disclosure becomes pre-eminently important when the only person who can make the judgement about value for money is the client.’
The description of advice includes firms demonstrating whether they are independent or restricted.
Percival said that the good and poor practice guide could provide more ‘flavour’ as to what an independent firm might look like, but the guidance provided by the FSA has been sufficient.
'It is apparent that the confusion lies in [in the fact] firms haven’t read the original guidance,' he said: ‘I think that genuinely new questions around independent and restricted have been fairly few since we issued that guidance, the only one I can think of off the top of my head is on passive, which we addressed in our latest newsletter.’