The proposals also reform the investment market, preparing both consumers and the industry for the future. The statement outlines how this new level of confidence and trust for consumers can be established by:
* Providing greater clarity for consumers about the advice service being offered by making a distinction between independent advice and sales advice, and including the connection with the proposed free Money Guidance service;
* Raising professional standards of all advisers by setting minimum qualifications for different types of advice and establishing a Professional Standards Board to boost consumers’ confidence in the industry;
* Modernising the way advice is paid for by requiring independent advisers to agree the cost of financial advice with customers up-front, removing the possibility of commission-bias and ensuring the cost of all advice is clear to consumers whenever it is given; and
* Introducing a new standard for independent advice by ensuring advice is unbiased, unrestricted and extends to all types of investments.
Jon Pain, FSA managing director of retail markets, said: "The RDR proposals provide a golden opportunity to regain consumer confidence and trust in the financial services industry.
"Consumers need help more than ever with their financial decisions, whether planning for retirement, saving for the future or dealing with current financial pressures. We believe there has never been a better time to foster more confidence in the industry and provide consumers with real help and advice to empower them to use savings and investments products more often.
"The reforms are wide-ranging and will be challenging for the industry, but they also present significant opportunities for firms and individuals operating in the retail investment market to modernise practices, raise standards, and treat their customers fairly.
"We are grateful for the feedback and engagement we have received from small and large firms alike. We remain open to suggestions on how to further open up access to advice through industry solutions such as guided sales, as well as through the free Money Guidance service that we are piloting in partnership with the Government."
The key proposals in the feedback statement include distinguishing between independent advice and sales to create better clarity for consumers about the investment services available. The key points of this distinction are:
* Independent advice is where adviser firms provide recommendations that are unrestricted and unbiased and consider all investments and providers from across the market to ensure they meet a customer’s needs. Consumers will agree the cost of advice up front – removing the potential for bias – and independent advisers will adhere to significantly higher professional standards.
* Sales advice will be where firms recommend the products of one or a limited range of providers and make this clear to customers. Sales advisers will also have to meet the same professional standards as independent advisers and show clearly the cost of their advice.
To increase and improve consumer access to investments, the FSA will also help firms develop a simplified sales service for a limited range of products, building on the work already underway in the industry and by individual firms. The FSA will remove its current rules for Basic Advice to simplify further this landscape.
The FSA will be consulting on policy proposals for the RDR during the first half of next year with the intention that all firms will have implemented the changes by the end of 2012.
In parallel with the RDR, the FSA has been reviewing the prudential requirements for personal investment firms (PIFs) and will publish a consultation paper on raising the minimum standard and improving the quality of capital and making it consistent for all firms.
