FSA paper raises retail standards
The FSA has released its review of retail financial advice in the UK
According to some independent financial advisors the new requirements could lead to greater consolidation as smaller entities struggle to deliver new standards. Consumer group, the Financial Services Consumer Panel (FSCP), has also criticised the continued grey areas between advice and sales.
Remuneration for financial advisors will be reformed with the aim of minimising conflicts of interest by reducing existing reliance on commission-based advice. More emphasis will be placed on up-front client fees which the regulator believes will foster professional standards.
Money guidance services will be a particular focus, to ensure the consumer's debt repayment abilities are effectively judged, necessitating a more detailed approach to existing 'know your customer' requirements.
"The RDR gives the financial community the opportunity to engage with both the regulator and consumer," says Joanne Smith, managing director at retail consultancy the Consulting Consortium. "By improving perception of the industry we will not only increase consumer confidence but ensure there is a solid investment market on which to build."
The FSA says standards of independent advice will be raised to produce two distinguishable levels of service. A broader, more comprehensive approach to market analysis will ensure independence of advice. For consumers seeking only basic advice, a more guided sale category will be introduced requiring less overview.
Higher professional standards are expected for financial advisers. The regulator aims to improve the industry profile and better mitigate risk by increasing qualification standards (to QCA Level 4 standard).
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