The Financial Services Retail Distribution Review in Perspective
I was fortunate to attend a recent presentation on this topic by Billy Seyffert, COO of Moonstone Compliance.
Many see the Retail Distribution Review as the beginning of the end. In a way, this is correct, but only in so far as it applies to the world as we know it.
Two concepts, essential to the correct understanding and handling of the review, are that:
- RDR is not a single event and
- RDR is not going to happen on one specific date.
What are the stated objectives?
- To support delivery of suitable products and advice
- To allow customers to make informed decisions
- To enhance professionalism in the financial services industry
- To promote fair competition
- To promote sustainable business models, including those of financial advisory services
All of this relates to Market Conduct and the fair treatment of customers.
How will RDR impact on the industry?
For some, RDR simply means that they will no longer be able to earn commission and will be forced to convince clients to pay fees. There is so much more to it.
RDR has to be understood in the context of the entire regulatory environment, including:
- The Financial Sector Regulation Bill
- The Insurance Bill and
- The Conduct of Financial Institutions Bill
How will it be effected?
There is a myriad of tools at the Regulator’s disposal, including:
- The FAIS Act and regulations
- Insurance Regulations (LTI & STI); PPR’s (LTI & STI)
- Board notices
- New legislation
- LTI & STI Acts and, very importantly
- Conduct Standards
When will it become effective?
Implementation is dependent on the tools to be used, and will happen in three phases:
- Phase 1 is already happening
- Phase 2 will occur post the Financial Sector Regulation Bill, which appears to be in the second half of 2017, depending on its grim progress through parliament.
- Phase 3 is scheduled for implementation as part of the Conduct of Financial Institutions Act, which currently appears to be late in 2018.
Some suggested Do’s and Don’ts of RDR
- Do stay abreast of developments by studying status updates as they are published
- Do consider the impact on your business continuously
- Do form a clear picture of the general direction and plan accordingly
- Do take responsibility for your own education
- Do not panic - seek expert guidance when unsure
- Do not believe fear mongering stories and
- Do not try and implement quick fixes to long-term issues
We are living in a world where disinformation has become the new truth.
It most certainly is not the end of the world per se. Approach it correctly and you can join REM in the chorus and sing: “It's the end of the world as we know it and I feel fine.”
And like they said in Hill Street Blues: Hey, be careful out there.
Paul Kruger: Moonstone Compliance (Pty) Ltd
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