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RDR checklist: What you need to do before it’s too late

08 October 2012

Tim Page, director at Page Russell, talks FE Trustnet through the forthcoming legislation and some of the changes required for it that many advisers may not have considered yet.

By Thomas McMahon,

Reporter, FE Trustnet

Less than three months remains until the Retail Distribution Review (RDR) comes into force, with many IFAs still not totally prepared.

Even those who have been planning for the main changes to the industry may not have thought through all of the implications this legislation has for their business.

Tim Page (pictured), director at Page Russell, tipped FE Trustnet off about some of the steps financial advisers may not have taken yet, but need to get on top of now. 

Get a credit licence

Page points out that switching to a fee-based service may require the acquisition of a licence to lend. 

"If advisers are thinking of getting fees paid in instalments, they need to check they have the right consumer credit licence," he said. 

"If you are asking for a certain percentage of your fee up front and the rest later then you are effectively extending them credit and your firm needs to have the relevant permissions from the Office of Fair Trading." 

Page explains that this is not something that takes a lot of time to do, but advisers need to hurry up and apply for a licence if they want to have this option. 

Sort out your reporting systems

"There are significant changes to reporting requirements, which firms need to be getting on top of from the start," Page said. 

"The first reporting date for our firm is Q1 and there’s a lot of extra information required that firms need to be aware of." 

He explains that not just the extra information required but also the challenge of recording it is quite substantial, and something that firms need to put time and resources into getting on top of now. 

The software and other systems can be difficult to set up, and Page says his firm has had to change its method of record keeping, for example. 

"It was relatively simple, but it’s now more complex so the guys recording the time need to be more knowledgeable," he said. 

An important element of this is recording risk.

"You will need some sort of record that proves you are thinking about risk management and doing something about it," Page added. 

He also said firms should consider putting together risk-register Excel sheets ready for use next year.

Keep a record of who you don’t serve

"The FSA is worried about investors taking on anyone as a client and shoehorning them into the investment process," Page explained. 

"Advisers need to be more selective about their clients and keep a record of those who they turn away as well as those who they take on." 

Page says that if an advisory firm is focused on the middle of the wealth spectrum, it should keep a record of any clients it turns away if the amount of money they have takes them over the limit the firm is best equipped to deal with.
The firm can then prove to the regulator that it is acting responsibly and within the guidelines. 

Make your charges clear

The FSA wants investors to be given worked examples of how much charges mean for them, so if they are being charged 3 per cent then the adviser needs to show what 3 per cent is of a "salient" amount. 

He commented: "I think the FSA would like this to be personalised for the client, so you tell them exactly what they would be charged, but as things stand advisers just need to give ‘salient’ examples." 

Record advice

Page says that the FSA is keen to see that clients are receiving advice rather than just being sold various products; advisers should put themselves in a position to prove this, he suggests.

"Record advice given as well as new business," he said. "We are creating a register of all advice given, such as, for example, when we tell someone they should write a will." 

Check your insurance bond fees

A change to the way that insurance bonds are dealt with means that adviser fees will eat into a client’s tax-free allowance, which may make the products less attractive. 

"If you are taking an adviser charge from an insurance bond it will now use up part of the 5 per cent allowance," Page said. 

"It used to be treated as a payment from the insurance company, but HMRC have confirmed that in the new world, an adviser charge is paid out of the client’s assets, so if you take it out of the bond it will be set against their tax-free allowance." 

If you have any questions about RDR, please write in the comment box below or email us at

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