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The retail distribution review - what it should have been

02 February, 2011 - Source: The Financial Services Forum

The retail distribution review - what it should have been.  By Merlin Stone and Bryan Foss

The Retail Distribution Review (RDR) is an attempt by the FSA to protect the consumer from poor financial and investment advice. In particular it tries, through regulation, to address professionalism and incentives in the industry. In this short paper we consider one important aspect of RDR - the likely effects (both intended and unintended) of the revised charging model, as advisors and consumers begin to understand and use it.

There is no doubt that the FSA’s intentions in changing the charging model of the financial services advisory industry in the UK are good. However, the main questions are what the results of this intervention will be, which of them are good, which bad, which unintended and whether the unintended consequences are good or bad. Why do we single out unintended consequences? It is because unintended consequences tend to be unmanaged, with uncertain timing, affecting unexpected parties, with ripple effects which are unanticipated and which almost certainly undermine the original consumer and industry objectives of RDR.

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