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RDR questionnaire reveals FSA’s business model concerns
by Michelle Abrego on Feb 25, 2013 at 13:25
The Financial Services Authority’s (FSA) review of advisers’ progress in adapting to the retail distribution review (RDR) will go far beyond checking how IFAs get paid; it will scrutinise every aspect of their business models, compliance consultants have warned.
Last week the regulator sent a questionnaire to 50 firms asking how they described their services, whether independent or restricted, and how they charged clients.
The focus and structure of the questions, however, showed the FSA was interested in more than these two topics, according to Malcolm Kerr, executive director in Ernst & Young’s financial services division.
Many of the questions asked for information about firms’ systems and controls, centralised investment propositions (CIPs), platforms and joint ventures with providers.
‘There’s a whole section on CIPs,’ said Kerr (pictured). ‘The FSA did a review on CIPs [in October 2011] and was quite disappointed about the number of cases where the advice was unclear or unsuitable. So there are lots of questions about that.’
Ian Stott, client services director at outsourced compliance firm The Consulting Consortium, agreed.
‘[The questionnaire] is about RDR implementation and adviser charging but also internal governance, and systems and controls,’ he said. ‘The two are absolutely hand in hand here.’
Kerr said if the FSA was not satisfied with the responses to its questions on CIPs and joint ventures, it could result in more regulatory action.
‘The responses to this will inform the FSA to look again at these areas if it seems that a huge number of organisations are using [CIPs and joint ventures],’ he said.
‘If it saw a large number of firms doing joint ventures, it would probably want to understand whether they have appropriate permissions and competence.’
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