Retail advisers’ RDR checklist

• Will you be offering restricted advice or independent advice?

For many firms, the key RDR-related decision is the choice between offering restricted and independent advice. If its advice is restricted, the firm needs to be able to describe the nature of its service in a way that not only makes its restrictions clear to clients (that is, as regards types of products, size of product range and access to different product providers) but that also differentiates the firm’s offering in what will be a vastly-expanded market for non-independent advice (for example, by highlighting any areas in which the firm specialises). If independent, the firm needs to ensure that it has the investment processes and structures in place that will enable it to demonstrably comply with the “comprehensive and fair analysis” and “unbiased and unrestricted” criteria for independence (for example, use of third party research providers, and of broadly-based, regularly reviewed panels of products and/or product providers).

• Will you be using platforms in delivering your services to clients?

Just as a firm’s product recommendations must be suitable for a client, its use of platforms as mechanisms for accessing those products must also be in the client’s best interests. Firms using platforms for any significant proportion of their retail investment product business should consider putting procedures in place (a) to establish, apply and evidence the criteria against which the firm selects which platform/s to use (always bearing in mind the heightened obligations that apply to independent advisers in this regard) and (b) to identify, manage and record scenarios where the client’s needs and circumstances dictate that advice should be given “off platform”.

• How will you fulfil your RDR disclosure obligations to clients?

From a purely regulatory perspective, the RDR imposes a wide range of disclosure obligations. To begin, firms will need to disclose the independent/restricted status of their advice and their adviser-charging arrangements through amended customer agreements and tariff schedules. In addition, firms need to consider (a) whether there are other client documents requiring amendment, (b) how oral disclosures about restricted advice status can best be delivered to clients and (c) how the per-transaction disclosure of total adviser charges will be accommodated within the firm’s standard sales/advice process.

• What else do you need to keep your clients informed about?

Although the FSA has begun to produce material aimed at raising consumer awareness about the RDR and the Money Advice Service intends to follow suit, firms with well-developed relationships with their clients are in a much better position to prepare them for the changes ahead by explaining how services and charging structures will be impacted. If you are already aware of changes that will directly affect the way your services are delivered to clients, (for example, services being re-structured, service charges becoming subject to VAT or being increased to compensate for lost commission income), make sure that clients understand when these changes are happening and why.