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The Retail Distribution Review

The way that financial advisers run their businesses, and how they provide services to you and other consumers, is changing. As from 31 December 2012 the Retail Distribution Review (or RDR for short) will be coming into effect, and it's important that you're aware of it and understand how it may affect you.

Put simply, RDR is all about increasing the level of transparency offered to consumers who seek out financial advice and are looking to buy financial products or services. So, whether you're looking for a pension, tax advice, even an individual savings account or any other form of investment, then RDR will have an impact on you.

RDR Objectives

What is the RDR looking to address?
When launching RDR, the Financial Services Authority (FSA) had three objectives. They wanted to ensure that advisers have a transparent and fair charging system for the advice they give. They also wanted consumers to have a clearer understanding of the products and services they sign up to. And finally, they wanted to determine that consumers only get advice from highly respected (and qualified) professionals.

So how will RDR achieve these aims?
Firms that offer financial advice must explicitly disclose and separately charge clients for their services.

Firms must accurately and clearly describe the advice and services they offer as either 'independent' or 'restricted'.

Individual advisers must adhere to consistent - and raised - professional standards, including signing up to a code of ethics.

Is Blackadders Independent or Restricted?

Blackadders will continue to offer independent advice to all its clients, ensuring we provide the most suitable advice and solutions from the whole marketplace.

Independent Advice: Definition
An adviser who wants to use the term 'independent' must:

  • Be able to consider and recommend products from the 'whole of the market', not just from a few select product providers.
  • Provide unbiased and unrestricted advice, after fully researching and analysing the relevant market, and offering evidence to back up their recommendations.
  • Inform clients at the outset that they are able to provide independent advice.

Restricted Advice: Definition
Where an adviser offers advice on products from a selected number of providers, or only considers certain types of investment products or services, then they don't look at the 'whole of market' and are therefore described as 'restricted' instead of independent. The adviser will need to point this out to a potential client at the first meeting, and explain the reasons why the advice they offer is restricted.

Investment Advice from a Qualified Professional

Another key measure of adviser professionalism will be improved qualifications for all advisers before they are allowed to give financial advice.

From 31 December 2012, advisers will be required to:

  • Subscribe to a code of ethics.
  • Hold an appropriate qualification, and undertake 'gap-fill' studies where necessary.
  • Carry out at least 35 hours of structured continuing professional development a year.
  • Hold a statement of professional standing from an accredited professional body.

These standards will be maintained and enforced by the FSA, and if existing advisers do not meet the new standards they will not be able to make personal recommendations to retail customers from 31 December 2012.