A lot of RDR work still needs to be done

30 January 2019 Jonathan Faurie

Of all the pieces of regulatory reform that is due to be introduced into the industry, the Retail Distribution Review (RDR) promises to have one of the biggest impacts.

The industry has already had to deal with the implementation of the RDR Phase I and is awaiting the implementation of Phase II which promises to deal with adviser categorisation and remuneration structures. 

Speaking at the recently held Spectacular Insurance Claims Conference, Nicole Britton – a Senior Associate at Clyde & Co – pointed out what still needs to be implemented when it comes to the RDR. 

So, where are we?

“There are still a few proposals that need to be finalised and implemented within their relevant place within the phased implementation approach. One of these is Proposal F which proposes that insurance premium collection be limited to qualifying intermediaries. Proposal J is also something that needs to be implemented and proposes that outsourced services on behalf of product suppliers to be more clearly identified and regulated. The general outsourcing standards were outlined in the Tranche 1 Amendments to the Regulations and Prudential Standards,” said Britton. 

She added that other important sections that still need to be implemented includes Proposal CC which will outline product supplier responsibility for RFAs / non-tied advisers. This will deal with specific responsibilities for insurers and amendments to the Policyholder Protection Rules. 

Proposal FF is another proposal that is waiting to be implemented. This will deal with general product supplier responsibilities in relation to receiving and providing customer related data. Also important is Proposal OO which proposes that product supplier commission be prohibited on replacement life risk policies. 

Other proposals

Britton added that there are other proposals that still need to be implemented. These include: 

  • Proposal TT which deals with special remuneration dispensation for the lower income market;
  • Proposal UU which deals with remuneration for selling and servicing short term insurance policies;
  • Proposal VV which deals with the conditions for short term insurance cover cancellations;
  • Proposal ZZ which deals with binder fees to multi-tied intermediaries and suggests that they need to be capped; and
  • Proposal AAA which would introduce a commission cap for credit life schemes with administrative work which would be removed. 

What still needs to happen?

There are still a number of things that needs to happen before the above proposals can be implemented. 

One issue that needs to be clarified and put to bed is the criteria for tied advisers. FAnews published a newsletter on 30 October where Lizl Budhram, Head of Advice for Old Mutual Personal Finance, said that the issue of adviser categorisation is causing waves in the industry. 

“There still needs to be some discussion on adviser categorisation going forward. There is currently a great debate in the industry with regards to this. One of the proposals on the table is that tied advisers will be referred to as product supplier agents. There is a lot of resistance to this from the industry because advisers do not want to be seen as product pushers or product sales people. They have been painstakingly working very hard for clients not to see them in this way,” said Budhram. 

There is also a debate with regards to independent advisers. Budhram pointed out that there are two possible categories on the table and that the use of the word independent in their job title still needs to be determined. 

Editor’s Thoughts:
A number of the proposals will have a significant impact on advisers and the way that they do business. However, these proposals have been public knowledge for a while now. What have advisers been doing to make sure that they won’t be impacted detrimentally. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts


Added by Frank Aglioti, 03 Feb 2019
As a financial advisor, I have work within the tied agency environment. I've always made sure that financial planning which includes understanding my clients financial needs, goals and aspirations is based on sound financial planning principles which include budget planning, reducing expenses, debt and providing for emergency funding to saving towards defined goals. Last but not least is providing the appropriate risk assurance, saving vehcile and investment strategy aligned to targeting goals within return/risk adjusted portfolio construction where I make use of independant performance and risk metrics supplied by Morningstar. Why must I be labelled by the regulators as a product salesman when my focus is financial planning. I love my profession and work while truling caring for the social and economic well being of my clients. I assure you that I have colleagues and peers who believe in the same ethos.

We must work together as a collective whether independant or representing one company or multiple companies, products and platforms do not differ to such a degree that the clients financial position will be severely impaired.

What will impair a clients financial position is poor advice and selling only a product without understanding your clients needs, goals and aspirations.
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Added by Paul Kristiansen, 30 Jan 2019
There are companies that sell undesirable products as referred to by the Ombudsman last year - if replacement Commissions are cancelled the only person that will suffer will be the Policyholder "holding" such unfortunate cover with all the horrific financial consequences that poor Family(s) will suffer - which might have been corrected by a competent but alas we are not social workers ! Advisor Paul K
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Added by old timer, 30 Jan 2019
Old Mutual and Discovery have cancelled my broker codes because I refused or failed to give them them the level of business they demanded.As an IFA I believe it is in the client's interests to supply the client with the best most suitable product not meet the sales quotas of specific product providers.
Of course people like Lizi Budhram will be at pains to deny these accusations. Her career will depend on being a 'team player' and making politically correct statements intended to put Old Mutual in a good light. The level of hypocrisy of these companies is absolutely mind blowing.
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