The Financial Services Authority (FSA) will conduct four thematic reviews in 2013 in an effort to ensure the implementation of the retail distribution review (RDR) is successful.
The reviews are set to begin later this month and will focus on professionalism, charging structures, description of advice, and non-advised sales.
The FSA supervision team will conduct them in three cycles with a different sample of firms each time. At the end of each cycle it will publish guidance to firms on good and poor practice.
Linda Woodall (pictured), FSA head of investment intermediaries, said the regulator would collect information through surveys, firm visits, file reviews and, where necessary, mystery shopper exercises.
‘We will meet with firms to check how they are operating the new rules in practice.’ she said. ‘What kind of business models are firms putting into place? Are they accurately describing their services? Charging structures: is there evidence that these are in place and that firms are communicating them accurately to clients?’
Woodall said the FSA would look at ‘innovations where the spirit of RDR may not have been appropriately applied’, specifically where advisers describe sales as non-advised in order to continue to receive trail commission or because they are not qualified to give advice.
In its November 2011 paper RDR post-implementation review: Measuring progress and impact, the FSA said that in 2013 it would assess whether advisers were meeting the RDR’s professionalism standards, including evidence of continuous professional development.
Woodall said the FSA had no plans to issue further guidance specifically on independent and restricted definitions but that it wanted to make it clear it had an agnostic view on how a firm chose to define itself.
‘What is important is that advisers accurately describe their services. If, for any reason, they are holding on to a label that does not accurately describe their business then that doesn’t seem to me to be in their clients’ best interest,’ she said.
Dante Peters, director of Crawley-based Magus Financial Management, said the reviews could lead to more prescriptive rules from the regulator.
‘There are so many ways of meeting the outcomes [the FSA has outlined] that perhaps a bit of structure would have helped a lot of firms,’ he said.David Wingar, managing director of Bridgend-based Future Asset Management, said the reviews would not trouble firms that had a transparent client-centric business structure.