Financial advisers and investors struggling to prepare for RDR

Sep 3rd, 2012 | By | Category: ETF and Index News

Financial advisers and investors are struggling to prepare for the imminent impact of new regulations under the Financial Service Authority’s Retail Distribution Review (RDR), a BlackRock-commissioned survey of advisers has found.

Financial advisers and investors struggling to prepare for RDR

Tony Stenning, Head of UK Retail, BlackRock.

From January next year, investment advice in the UK will become fee-based, replacing commissions advisers previously received from product providers. However, 61 percent of advisers said they did not feel prepared for RDR, with 87 percent admitting they had not finalised future client propositions.

Significantly, 57 percent said they were unsure of the impact their adviser status – being ‘independent’ or ‘restricted’ – would have on their businesses. However, advisers generally agreed (68 percent) that it would be more important to become either a chartered or certified financial planner than an IFA over the next five years.

At the same time, advisers felt that clients are not ready for RDR, with just 12 percent believing clients are aware of the implications the new regulations will have on the availability and nature of investment advice.

Tony Stenning, Head of UK Retail at BlackRock, said: “With under 130 days until RDR takes effect, many advisers and investors are still wrestling with what the new regulations will mean and how they should act. Some advisers are clearly racing to complete the minimum required qualifications, but this is potentially drawing their attention away from transitioning their businesses and communicating potential changes to clients.”

BlackRock aims to take a leading role as the UK moves to a fee-based model for financial advice under RDR. In July, the company launched its first RDR-friendly funds range, the BlackRock Consensus Funds, which act like funds of index funds by investing in several other BlackRock index-linked products. The company also continues to roll out exchange-traded funds (ETFs) under its iShares banner, products which are expected to benefit from the introduction of RDR.

Indeed, earlier this year, David Bower, Head of iShares UK, said: “The ETF industry is set to become a major beneficiary of the RDR, and this is already evident from the strong growth iShares saw on key wrap platforms in 2011.

“With the banning of commission to financial advisers as of 2013, ETFs will be on a level playing field with other investment products. This, combined with the fact that ETFs offer low cost and transparent access to a broad range of markets, means that ETF use amongst financial advisers and discretionary fund managers is likely to continue to rise.”

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