1 Introduction
1. The Financial Services Authority's Retail
Distribution Review (RDR) is a major reform of the regulation
of retail investment advice. Our inquiry was prompted by significant
concerns raised by sections of the industry over key elements
of the Review. The RDR as a process has been underway for some
time, and several elements of the RDR have now proceeded to final
rules.
2. After releasing terms of reference for the
inquiry, and in response receiving a significant amount of written
evidence, we held a hearing with Mr Hector Sants, Chief Executive,
Financial Services Authority, and Ms Sheila Nicoll, Director,
Conduct Policy, Financial Services Authority, on 9 March 2011.
The Financial Services Authority has also provided several pieces
of written evidence, both prior to and after our hearing, which
have been published with this report.
3. The scope of the Retail Distribution Review
(RDR), undertaken by the Financial Services Authority (FSA) was
limited to retail investments. The FSA noted that "Within
the definition of retail investments we include, products and
services such as pensions, investment funds (unit and investment
trusts), life products (endowments, with-profits and unit-linked
policies) and exchange-traded funds."[1]
4. There is a temptation to think that the RDR
will only apply to Independent Financial Advisers (IFAs). However,
as the FSA's evidence points out:
Our new rules will apply to all advice given in relation
to such products and services, regardless of the type of firm
for whom any individual adviser works—so advisers within
banks, asset managers, life insurers, sole traders, partnerships,
stockbrokers, networks, IFAs or financial advice firms will be
subject to the same regulatory environment.[2]
5. In our terms of reference, we concentrated
on three particular topics: changes brought about by the RDR to
the qualifications of advisers; their remuneration; and how their
advice can be classified. These topics were raised by Mr Sants
in a hearing with us on 23 November 2010.[3]
As well as these particular topics, several other issues were
raised in the written evidence we received, and we have provided
commentary on some of them within this Report.
6. As stated earlier, we have received a great
deal of evidence both for and against the measures within the
Retail Distribution Review. We thank all those who took time to
submit evidence. The evidence we have received is not one-sided,
and the Committee has been mindful of the need not only to listen
to the concerns and comments of the advisers affected, but also
to representatives of the consumers they advise, as well as the
regulator. While our Report does not quote or reference every
single piece of evidence submitted, all were taken into account
when deciding upon the major themes discussed within this Report.
Examples quoted are exactly that, examples of the views we received,
and should not be considered the only view on each topic. We felt
it would not be appropriate to consider the number of submissions
in support of, or against, any measures within the RDR as precisely
indicative of the level of support for that measure within the
overall adviser community.
1 Ev 23 Back
2
Ibid. Back
3
Treasury Committee, Financial Regulation: a preliminary consideration
of the Government's proposals, Seventh Report of Session 2010-11,
Volume II, HC 430, Q 738 Back
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