Which? has challenged the Treasury Select Committee’s plan to delay implementing the Retail Distribution Review (RDR) for 12 months by asking the Financial Services Authority to ‘stick to its guns’.
Which? chief executive, Peter Vicary-Smith said: ‘we urge the FSA to stand firm and stick to its original deadline as the industry has had plenty of time to prepare for the RDR.’
Independent Financial Advisers
The Treasury Select Committee wants to extend the deadline to allow Independent Financial Advisers (IFAs) more time to comply.
The RDR aims to revolutionise the financial advice sector by requiring consumers to pay a stated fee for the advice they receive. While this will not necessarily have to be paid up-front, the FSA says it will prevent advice firms from ‘hiding the cost of their advice’ behind the cost of the products they sell. The RDR aims to ensure that consumers are offered a transparent and fair charging system for the advice they receive.
Many IFAs, including their trade association, the Association of Independent Financial Advisors (AIFA), accept the need for change and are increasingly embracing the proposals as a means by which IFAs can restore their reputation with consumers and expand their businesses.
Peter Vicary-Smith said: ‘the majority IFAs have worked hard to meet the deadline and have bought into the need to raise industry standards but a vocal minority seem determined to derail the process.’
Stick to its guns
Which? is concerned that delaying the RDR would prolong consumers’ exposure to the potentially disastrous effects of poor financial advice and has said ‘it’s vital that the FSA sticks to its guns’.
Which? has long held concerns about the quality of financial advice. The current minimum qualification a financial adviser is required to hold before they can give advice is set at Qualifications & Credit Framework (QCF) Level 3 (equivalent to an A-Level examination).
Quality of financial advice
We welcome the Treasury Committee’s view that there is merit in a move to a higher level of qualification. Improving the qualification framework would give IFAs a stronger professional ethos and reflect the high level of responsibility financial advisers have for the financial welfare of clients.
In March 2010, the FSA published rules that will prevent financial advisers from earning commission when they sell retail investment products to consumers. The FSA says its regulations, due to come into force from the end of 2012, will ‘remove commission bias’ by banning companies from accepting cash in return for recommending specific products.
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