Extension would not detract from RDR

If you are an adviser who has not yet met the qualifications requirements of the RDR then it goes without saying that the pressure is on.

Likewise, if you are a principal of a firm in which several advisers have not quite made the grade, then you are looking at a severe business risk and at the very least a huge potential recruitment challenge.

Other firms will be in a better position, but may be at risk of losing a quality adviser or two. At any other time this could be a huge blow, but it may now feel like an inevitable symptom of the RDR transition.

That is why the news that the FSA is allowing some advisers a degree of dispensation around the year-end deadline will have attracted a huge amount of attention.

A freedom of information request carried out by Investment Adviser’s sister title, Financial Adviser, past week showed that in the last couple of years 50 firms have applied for RDR deadline extensions for some advisers. In total, 13 have been approved in last two years and 19 are still pending.

But the criteria are tough, as shown by the following regulatory passage: “Firms must demonstrate exceptional circumstances exist that prevent, despite efforts, an individual from completing an appropriate qualification or, where applicable, completing qualification gap-fill by the end of 2012 and that the individual will not carry out the activity of a retail investment adviser during the period of the modification without appropriate supervision.” In other words, the FSA won’t give you a waiver if your advisers left it too late to study.

There will have to be other evidence. If the justification is medical, then that may require a medical opinion. What one wonders about life’s other slings and arrows of outrageous fortune, a messy divorce or a bereavement? Additionally, it doesn’t look like very small firms will be able to meet that supervision requirement, which some may claim with reasonable justification is discriminatory. The conclusion may be that it is worth applying, but don’t bank on success.

The FSA’s framework is very much a legal one, but in my view that is a mistake. A deadline may well have been necessary to concentrate advisers’ minds. What is not clear, however, is the benefit of sticking to it rigidly in these last few months.

The big shift at the heart of the retail reform is the move to advisers and consultancies charging clients rather than taking commission from product providers. If you bring in all of the regulations surrounding risk, capacity for loss, platform charging, central investment propositions and the new criteria for independent and restricted advice, it adds up to nothing short of a revolution. As with any revolution, there is a huge amount of experimentation and, like many revolutions, very little compromise. This is a new business model dictated from the top down.