In previous blogs, I’ve touched on the impact to employers of new legislation, particularly related to pensions, and discussed how many employers are finding it difficult to come to terms with the changes any new legislation may bring to their business. New research from us supports this trend, finding that only 31% of employers are aware of the FSA’s Retail Distribution Review (RDR) and the planned regulatory changes in response to it.
The RDR began in June 2006 and is intended to boost consumer confidence in the retail investment market, which is of key economic importance to the UK and becoming an increasing priority for the financial services industry. The review will include the removal of commission from investment products and a move to fee-based advice instead, with full implementation due to come into force by 31 December 2012. The changes also mean that anyone giving financial advice has to be qualified to a new level, meaning that many advisers have to update their qualifications now. Any advisers who do not meet these new requirements will no longer be able to offer financial advice.
Our research findings show 69% of employers admit that they are unaware of the changes being made as a result of RDR; changes that could impact the benefits packages they offer and the providers they currently have in place. Ultimately, employers should benefit from the fact that any adviser they use after this date will be qualified to a minimum standard and will be acting free from any possible bias that commission rates could give them.
The regulatory changes as a result of the RDR have potential implications for any employer. It could particularly affect the arrangements concerning employee benefits packages so should be of concern to those with responsibility for this, such as HR professionals. Employers will want assurance that any adviser used now or being selected for the future will meet the minimum standards required. Given the timing of these regulations and the process that many employers follow for selection of providers, this is something that employers will need to act on very soon.
It’s important to get up to speed with the potential changes now as many independent financial advisers are considering limiting the range of products they advise on, and many are leaving the industry altogether. Employers should therefore make themselves aware now about how they may be affected. Asking the IFA directly is a good way to do this, but receiving training from a company who is already up to speed on the changes will also help.
Jeanette Makings, Director - Financial Education Services, Close Brothers
Jeanette joined Close in 2000 and has held a number of roles including heading up our marketing team, prior to her current role leading the team that works with employers to deliver our financial education services.
Against the backdrop of the growing importance that many employers now place around employee engagement, Jeanette has expanded and enhanced our financial education services enabling more employers to access them and so differentiate their employee offering and demonstrate the value they place on developing and supporting their people.
