Doing the right thing four years after RDR

It hardly seems possible, but that was four years' ago. Those of us that were heavily involved in implementing, consulting on or writing about it at the time are probably still recovering from it.

Today those changes put in place by the RDR are more or less fully embedded, but we are about to embark on phase two. If RDR has put the basic principles of distribution in place, the current round of regulation is getting in to more detail.

I would include Mifid ll (Markets in Financial Instruments Directive), Priips (Packaged Retail and Insurance-based Investment Products) and more recently The Asset Management Market Study (AMMS) – interim report (published in November 2016 by our very own FCA), can be seen as a so called RDR 2.0.

The FCA is watching and will expect asset managers, and those distributing their products, to do better.

Mifid ll and Priips are close to implementation, although the fact that both have been delayed by a year, to January 2018, points to the importance and far reaching effects of this new legislation on the industry.

In terms of retail customers, those served by advisers or execution only, the main thrust of this legislation is to do the following:

• Provide consumers with accessible and transparent information on investment products.
• Increase the level of information on costs and charges provided to retail customers.
• Minimum quarterly reporting on portfolios.
• Tighten rules around client suitability, ensuring tolerance for risk and capacity for loss are taken in to account.
• Categorise investment products in to complex and non-complex. The former meaning that clients have to go through an appropriateness test at the point of sale.
•  Improve product governance where appropriate products are designed for the target market.
• Improve corporate governance of manufacturers and distributors.
• Eradicate inducements which may be seen as ‘buying’ the distribution of products.
• Evidence best execution.

These are just the highlights, and thankfully much of this is already in place as a result of RDR. Indeed they should always have been in place under the long standing regulation of Treating Customers Fairly.

The most recent publication from the FCA, the AMMS, is challenging the asset management industry and trying to establish if all this legislation and regulation over the last five years or so is actually benefiting clients.

It asks if transparency, value for money and client suitability have improved and if not, what can be done to do so.