Secondary

Proposed Adviser Models under RDR

The information below is a brief synopsis of the proposals contained in the RDR proposals in order to better understand the article below. A comprehensive outline of the various roles is contained in the RDR discussion document.

The Retail Distribution Review envisages three types of advisers. An adviser may only act in one of these capacities, although an “investment products IFA” may be multi-tied for insurance risk products and/or health benefits.

Tied advisers

A tied adviser is any adviser who’s contractual, ownership or other relationship with a product supplier restricts the adviser to providing advice on the products of that product supplier only. For this purpose “product supplier” includes entities in the same product supplier group, but this will be clearly defined and regulated to avoid abuse.

Multi-tied advisers

A multi-tied adviser is any adviser that is not a tied adviser and also does not satisfy the criteria to be an IFA.

Additional conduct standards will be formulated to manage conflicts arising from specific scenarios, for instance where unequal relationships exist with different product suppliers.

The multi-tied adviser will be required to keep records regarding the proportions of business placed with different product suppliers, with motivations as to why the support for certain providers exists.

Independent financial advisers (IFAs)

An IFA will need to meet two sets of independence criteria:

  • Adequate product & product supplier choice will be the yardstick, but further industry input is requested on how to determine these. The Regulator accepts that a “whole of market” standard is not feasible.
  • There should also be freedom from product supplier influence – specific scenarios may exclude an adviser from qualifying as an IFA.

Financial planners

Conduct standards, including appropriate fit & proper standards, will be set for financial planning.

Standards may be set with reference to membership of and/or qualifications provided by appropriate professional associations, or may take these into account.

A tied or multi-tied adviser may be a financial planner – but with appropriate standards to manage possible conflicts arising from limits on product/product supplier choice.

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