Financial Conduct Authority to merge RDR review with assessment of FAMR

Out-Law News | 04 Jul 2017 | 11:17 am | 2 min. read

The Financial Conduct Authority (FCA) has delayed its review of the impact of the Retail Distribution Review (RDR) until 2019 to coincide with a review it plans to undertake on the impact of the Financial Advice Market Review (FAMR) reforms, it has confirmed.

The regulator had been due to re-examine the impact of the RDR, which was introduced in 2012, this year, but confirmed its rethink in a new paper published on the baseline position and indicators it intends to reflect on when monitoring the development of the financial advice market.

The FCA said the delay would allow the market time to react to regulatory change caused by FAMR and the second iteration of the European markets in financial instruments directive (MiFID II). MiFID II's implementation by EU member states was delayed until January 2018 to allow technical work to be completed.

"Many of the FAMR recommendations have only recently been introduced or are still in the process of being implemented," the FCA said in its new paper. "As the market is still reacting to significant new regulatory change (alongside other interventions such as MiFID II and Insurance Distribution Directive (IDD)), we believe that a review at this stage would be of limited value."

The FCA said it intends to publish its report on the impact of the RDR and FAMR in early 2020.

Expert in the regulation of financial advice Bruno Geiringer of Pinsent Masons, the law firm behind, said: "Time marches on and the Retail Distribution Review has been and gone and, to all intents and purposes, been consigned to history. For those that do remember the RDR, some may feel that it failed in many respects to achieve its objectives. Will we ever see the famed post-implementation review?  The reality is it is best not to dwell on it too long or hold your breath. Brexit is just round the corner and no doubt there will be another reason in a few years’ time to shake up the UK advice market and move away from MiFID because of the UK market’s unique characteristics."

The RDR introduced major changes to make the retail investment market work better for consumers. In 2014, the FCA published the first of three planned post-implementation reviews.

That research found the RDR had improved the service offered to consumers by financial advisers and reduced the level of product bias, and that new rules on adviser charging had reduced the cost of products and platforms. Additional research also showed that fears of an 'advice gap', restricting the availability of lower value advice products to those with less complex demands, had largely been unfounded.

However, the FCA said that the cost of advice itself had not appeared to have decreased, and that in some cases it had even increased despite a "surprisingly high number" of firms incurring little or no additional costs as a result of the changes.

The first review led to further proposals aimed at addressing these issues, including how firms could better disclose information to consumers.

FAMR took place in 2015 and aimed to identify ways in which the government, industry and regulators could take collective steps to stimulate the development of a market which delivers affordable and accessible financial advice and guidance to everyone, at all stages of their lives.

The FCA has now published the FAMR Baseline Report (48 page / 964KB PDF), which identified three main themes to measure the development of the market: accessibility, affordability and quality of advice. These will be tracked on an annual basis and findings will be used as a benchmark to assess the outcomes of FAMR when conducting the review in 2019.