Moore Stephens says some insurance firms will not survive RDR implementation
RDR has been described as the biggest shake-up of the distribution landscape since commission disclosure was introduced in 1988. It will affect all businesses operating in the insurance industry which have direct contact with retail clients, or which use financial advisers to distribute their products. And it will introduce new rules under which independent financial advisers will no longer be able to receive commission from the provider of an investment-backed product, but will instead have to agree an upfront fee with the customer. In the insurance industry, this might typically include life assurance policies.
Rupert Findlay, a compliance consultant with Moore Stephens, says, “Agreeing such a fee may prove to be difficult, given that it has been estimated that roughly two-thirds of UK consumers believe that financial advice is free. Firms which haven’t already created an operational charging structure will need to decide quickly which proposition they will be offering their clients. Advisers will have to disclose details of their charges. Over the past couple of years, a number of firms have tried out a variety of charging models, with fixed fees, hourly rates and/or percentage of funds invested all being used to compensate for loss of commission.”
RDR is also designed to raise professional standards. Advisers will have to attain a QCF Level 4 qualification – one level above the well-known FPC exam – and hold a Statement of Professional Standing, issued by an approved accredited body. To meet the December 2012 deadline, advisers must submit all relevant information and evidence by October 2012.
Rupert Findlay says, “Firms should therefore have chosen their accredited body of choice and be starting to compile the necessary qualification information from their advisers. The new rules send a signal to brokers and others to look closely at their levels of qualification and professionalism.
“There is a risk that some firms will not be able to survive under the new rules. However, RDR can also create opportunities for firms, as distribution channels will be refined and direct customer contact may increase.”
Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting networks, with 636 offices of independent member firms in 100 countries, employing 21,197 people and generating revenues in 2011 of $2.3 billion. www.moorestephens.co.uk
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