Retail Distribution Review (RDR)

On December 31st 2012, the Financial Services Authority, the independent non-Governmental body that regulates the financial services industry in the UK introduced the Retail Distribution Review, or RDR. 

Simply put, the RDR has been designed by the FSA to re-establish a confidence amongst consumers in the retail investment market as well as improving clarity between client and adviser, raising the professional standards of financial advisers and increasing the level of transparency offered to consumers who are looking for financial advice and to buy products or services.

The three fundamental aims of the RDR are – 

  • To ensure financial advisers operate a fair and transparent charging system for their advice
  • To ensure consumers have a clear understanding of the advice and services they receive
  • To ensure consumers receive their advice from professionals who are highly respected 

These aims, as laid out in the RDR (and detailed below) will be achieved by – 

  • Requiring firms to explicitly disclose and separately charge clients for the advice they receive
  • Requiring firms to describe their services as either ‘independent’ or ‘restricted’
  • Requiring all appropriately qualified advisers to adhere to consistently high professional standards, including a Code of Ethics

Changes To How Jeffreys Henry Financial Services Charges For Advice

As with any purchase you make, as a consumer you are looking for value for money, transparency and an ease of understanding and the new RDR rules have been designed to ensure you get exactly that.  

Any business qualified to offer consumers investment and financial advice (including banks and building societies, financial advisers, stockbrokers, wealth managers and product providers) are now required to – 

  • Set out their own charging structure, based on the level of service they provide
  • Disclose all charges to the consumer, prior to them making any commitment to buy, using a price list, rate card or tariff
  • Ensure that if an on-going fee is charged for a specific product or service, that service is delivered to a high standard for the duration of the service

The most important point to understand is that you are aware of the costs involved before entering into an agreement, but as each client’s requirements are different, we will never offer an ‘off the shelf’ solution and each set of fees is tailored to your specific needs.

All advisory firms in the market are responsible for setting their own fees and charging structures (in the same way other professionals such as solicitors and accountants traditionally charge) and may include hourly charges, one-off fees and different levels of fees dependent on the services required and therefore provided.

What Is ‘Independent’ & ‘Restricted’ Financial Advice?

The RDR makes sure that all financial advisers must tell their clients at the outset whether the advice they are to receive is either independent or restricted.

‘Independent’ means that your adviser will provide you with unbiased advice, recommending products and services from the ‘whole of the market’ after comprehensive research and analysis of the market and offering evidence to justify their recommendations.

‘Restricted’ advice is when your adviser will only talk to you about specific products from a select number of providers rather than looking at the whole market and will explain to you the reasons why.

At Jeffreys Henry Financial Services, our advice is independent. We believe in offering you the broadest range of available products (described by the FSA as ‘retail investment products’) and ensuring that you have access to all types of investment vehicles from all service providers in the marketplace.

Investment Advice From Qualified Professionals

Another key driver of the FSAs commitment to improving levels of consumer confidence and the need for the highest professional standards is to ensure that all advisers – 

  • Subscribe to the FSAs Code of Ethics
  • Hold an appropriate qualification and plug any missing knowledge gaps with structured learning
  • Undertake to carry out 35 hours of Continual Professional Development per year
  • Hold a Statement of Professional Standing (SPS) from an accredited body

These standards will be maintained and enforced by the FSA and Jeffreys Henry Financial Services is obliged to submit data to them about each of our advisers.  If it is discovered that existing advisers do not meet these standards, they will not be able to make personal recommendations to clients on or after January 1st 2013.

The RDR hasn’t been thrown at the financial world at the last minute. We have had time to understand its implications and to prepare properly for its introduction and each of our client-facing financial advisers have the necessary qualifications (and in most cases going beyond the required levels of competence) to continue to offer a service of the highest standard.

In addition, we also have our own standards of excellence that we expect all our staff (not just the client-facing advisers) to adhere to.

Why Should You Pay For Financial Advice?

Traditionally, financial advisers have received commissions on products they have sold you so technically, you are paying for the advice you receive but you may not always realise how much or quite what the payment is for.

The Retail Distribution Review, amongst many other improvements to the world of financial services will remove these ‘stealth’ costs and eliminate any confusion or misunderstanding as to how financial advisers are paid. 

By removing the traditional commission structure, temptation to offer products that may not be your best solution but pays the highest rate of commission is also eliminated. If it’s you paying the adviser rather than by the company selling a particular product, you can be certain he or she is acting in your best interests and not for personal gain.

The RDR will revolutionise the world of financial advice but at Jeffreys Henry Financial Services, not only are we fully qualified and prepared, we will continue to give our clients an unrivalled service offering based on honesty, transparency and an unwavering commitment to sound financial advice with positive long-term implications. 

For more information on the RDR, please visit the FSA website at www.fsa.gov.uk/about/what/rdr

Jeffreys Henry Financial Services is an appointed representative of Vintage Financial Ltd, which is authorised by The Financial Services Authority.