FSA rejects TSC call to relax RDR deadline
The Financial Services Authority (FSA) has rejected calls from the Treasury Select Committee (TSC) to delay the implementation of the retail distribution review (RDR) by one year and relax rules around grandfathering.
Despite the RDR still requiring what the FSA called "structural changes", they said that there was "clear evidence" that moving the date for level 4 qualifications was not needed.
The watchdog said that since the RDR has already been "a long-running initiative" that was set out in 2007, the industry was already "well-advanced in its preparations".
In relation to calls from the TSC to relax the ban on grandfathering on a case-by-case basis, the FSA highlighted that "alternative means" were already available to those not seeking to take extensive extra exams.
Reporting that 49 per cent of IFAs having already met qualifications and nearly 82 per cent are planning to remain as retail investment advisers, the FSA said that formal examinations should "not always" be required.
The regulator suggested that there were "a number of alternative means" available to obtain qualification with "exemptions" that should be made in particular circumstances.
The FSA emphasised that the RDR would improve the quality of advice being given to consumers, especially given a high number of past "mis-selling scandals" and a lack of "consumer trust" that have tarnished the retail investment market's reputation.
According to the FSA, mis-selling scandals and a lack of consumer trust have amounted to a reported £15bn in compensation for mis-sold pension and endowment policies.
The statement did not state the proportion of this that is accounted for by independent advisers, nor give a timeframe for the figures.
Separately, the Financial Services Consumer Panel (FSC) also expressed concern over the proposed postponement, saying that any further delay risked "harm" being caused by "poorly qualified advisers" and that consumers deserved "higher professional standards".
Kay Blair, vice chair of the Consumer Panel, said: "The burden of opaque fees and costs can last a lifetime.
"While we acknowledge the cost in terms of time and fees that some advisers will incur in achieving the minimum qualification level, there can be no justification for the FSA to back away from this important requirement at this late stage."
In contrast, the Association of Independent Financial Advisers (Aifa) issued a statement in support of the TSC's decision.
Stephen Gay, director general of Aifa, said that the Committee's recommendation for a delay to the RDR implementation date was in line with Aifa's "removal of a cliff edge date" that ensured consumers had access to advice in the short and medium term.
"At the heart of RDR is the end consumer, who needs advice, and the Committee has rightly put the focus back on them," Mr Gay added.
Although Aifa said that it is in support of the 12-month delay, its statement revealed no comments on the RDR's qualification requirements.