Scottish Life sets out its position on the retail distribution review online

If you want to keep up with the debate on the retail distribution review it is worth having a look at the new website from Scottish Life which is aimed at helping intermediaries assess the potential impacts of the regulator's recent discussion paper.

As we know the retail distribution review (RDR) has been described by Chris Cummings, director general of the Association of Independent Financial Advisers (Aifa), as presenting a 'clear and present threat to the long-term existence of the IFA community'.

Scottish Life's report looks in depth at two key areas - the future shape of the advice market and the future of adviser remuneration.

Scottish Life says that in general it welcomes the RDR. 'In particular we are pleased to see the debate on transparency of commission move forward and broadly support the principle of consumer agreed remuneration,' says the report.

'We welcome moves to increase professionalism in our industry but have concerns at an over-reliance on academic qualifications.' Scottish life is also 'very concerned about the suggestion of having no price-cap on primary advice products, which could lead to consumer detriment.'

Scottish Life wants to see the definition of independence including a whole-of-market proviso as well as incorporating the new definition of fee-based remuneration. 'We welcome reports that FSA are moving away from the narrower definition suggested in the RDR,' says the report.

The life company warns that the possible effects of the RDR could be that the advice market could be squeezed in the middle like an hourglass. The general financial adviser category looks to be relatively unsustainable and unattractive, leading to a potential de facto polarisation of the market between professional financial planner and primary adviser status.

It warns too that the practice of providers defining commission as an arbitrary percentage of premium will become increasingly difficult and charges for advice are more likely to reflect the commercial value of work done. Clients will find it easier to understand how commission affects their plans and will more readily be able to ascribe value to the service their adviser provides.

Offering primary advice will be attractive to banks and their insurance company subsidiaries. 'We note that some have already started to purchase distribution in advance of RDR changes and we expect to see a resurgence of direct sales forces (although they may not be called that any more),' says Scottish Life.

'Since the RDR was published there has been a great deal of comment, some of which has been remarkably uninformed,' commented Mark Polson, head of corporate business at Scottish Life. 'It's important to remember that this is only a discussion paper and we would expect a number of changes to result from the current consultation. But it's pretty clear which way the wind is blowing, and as independent-only market-leaders in factory-gate pricing/CAR we believe we are well placed to offer informed comment.'

Mark Polson will be appearing at a number of regional Scottish Life seminars in late summer and early autumn to discuss and analyse the RDR, personal accounts and the impact these may have on corporate pension markets in particular. Advisers who wish to attend one of these seminars should get in touch with their normal Scottish Life contact to indicate their interest.