Written evidence submitted by Brewin Dolphin
RDR AND PRIPSMEASURES, COSTS, OVERLAP
AND THE INDUSTRY IMPACT
Further to our briefing paper on RDR for the
TSC and the debate in November 2010 (attached) the table below
shows the issues covered jointly and severally by the two proposed
The European Commission is consulting on a Directive
to ensure a common level of consumer protection for Packaged Retail
Investment Products (PRIPs). The scope of PRIPs is broadly similar
to the RDR covering a similar product range and issues (although
it does not cover professionalism which includes qualifications
and competency). The fact that PRIPs is likely to be implemented
shortly after the RDR means there is a real risk of further confusion,
costs and "gold plating".
|RDR||PRIPs (To be implemented as part of MiFID2, UCITS, IMD)
|Unit Trusts ||Yes||Yes
|Investment Trusts ||Yes
|Investments packaged as life insurance policies
|Stakeholder pension schemes||Yes
||No (ongoing work by EIOPA)|
|Personal pension schemes||Yes
||No (ongoing work by E)|
|Structured deposits ||Yes
|Structured securities ||Yes
|Stocks and Shares ||No
|Any other designated investment which offers exposure to underlying financial assets, in a packaged form which modifies that exposure when compared with a direct holding in the financial asset
|SELLING PRACTICES & TRANSPARENCY||
|Key Investor Information Documents||No
|Client Categorisation ||No
|Best Interest of the Client ||No
|Conflicts of Interest||No
|Adviser Charging (no trail)||Yes
|DEADLINE||31 December 2012
||500 million +|
"The Commission estimated that the PRIPs disclosure and
sales rules would cost intermediaries, insurers and banks across
Europe between 350 and 550 million with another 110
million or 220 million in ongoing costs. The impact for
European advisers and brokers would be between 50 and 125
million in one-off costs and 50 to 80 million in ongoing
Brewin Dolphin (BD)turnover in 2010 was £250
million and below we set out the RDR principal measures and our
projected costs of their implementation.
The particular aspect of RDR not addressed in PRIPs is adviser
qualifications. While competency is part of the overall MiFID
regimemost IFAs in the UK are not presently subject to
MiFID (they may well become so following PRIPs, though possibly
not in respect of competency).
We agree that all advisers need to be suitably qualified
to advise on retail investment products and that mis-selling scandals
of the past should be tackled. Therefore, we fully support the
FSA in its aim to ensure that there is a credible infrastructure
in place and that all advisers are fully qualified. However, we
believe that the RDR implementation timetable is not long enough
to enable the industry to deal with all those who will need to
become qualified under the new regime and to approve and monitor
all firms' individual CPD systems.
BD estimated costs of training and exams including opportunity
costs for all staff to be RDR compliant are £3.3 million
and will be in addition to our existing £1 million T&C
IN RDR AND
Restricted Status of firms, ie those not able to offer the
full range of products within the scope of RDR. These firms will
be required to implement the following changes to their practices
and incur these estimated additional costs (for firms the size
and scope of BD):
Client communicationsRestricted status and
new adviser charging rules must be communicated in writing to
all clients (one way only) cost: £150,000.
Restricted status compulsory oral communicationtext
to be read to new clients over the phone or in person taking five
minutes per clientBD costs based on new business in 2010£630,000.
Additional reporting requirements to the FSAset
up costs £35,000 and ongoing annual costs £23,000total
£58,000 in year 1.
Additional reporting requirements for clientssystems
modification and set up costs estimate £100,000., with minimal
ongoing annual costs.
Designated Professional Bodies (eg Law Society) members
may not refer business to "Restricted" firms (or they
must refer business to Independent firms) ~ 1/4 of BD's business
is introduced by solicitors and accountants and so could result
in unquantifiable but considerable loss.
Fee only charging by financial adviserswhether
Restricted or Independentmay drive many small firms out
of business and thereby reduce competition and consumer choice.
Full and fair disclosure of all fees and commissions to the client
should be a sufficient measure. PRIPs also bans third party payments
and the proposals here are broadly similar to RDR and there is
a significant overlap with the rules on inducements.
The full implementation of the RDR should be delayed
until the PRIPs proposals are agreed by the European Commission.
The considerable cost differential for implementation between
the FSA's latest estimate for RDR of £1.7 billion for the
UK industry and the EC estimate for PRIPs of 500 million
+ for all EU members, is too wide to contemplate doing the job
The RDR proposes disproportionate "one-size-fits-all"
measures that have angered the financial services industry and
risk a loss of confidence in the Regulator itself and among consumers.
The RDR process and costs should be reviewed and the
good principles of professionalism and transparency taken and
introduced at the same time as PRIPs selling practices and transparency
proposals, under the new Consumer Protection and Markets Authority
(CPMA) regulatory structure which the Coalition Government plans
17 January 2011
MiFID2-implementation estimated 2013 Back
Citywire 26 November 2010 Back