Question: What impact do you think the Retail Distribution Review (RDR) will have on financial advisers? What are the pros and cons?

Each month, we ask our industry to answer one big question!

Alasdair Buchanan is head of communications at Scottish Life

With some relatively minor changes, the RDR should be very positive for IFAs. Its primary focus is to improve public confidence in the life and pensions industry - providers and advisers alike. That has to be a worthwhile objective.

There are two main strands to this - improving professionalism and improving the way advisers are remunerated.

Work on fleshing out the detail of the professionalism proposals is under way. It's essential that the key elements are established quickly and that support mechanisms are then developed in a pragmatic, rather than theoretical, way.

On remuneration, the key elements are already established - adviser charging, with greater transparency and no provider involvement in determining what advisers are paid. Again these should be very positive for IFAs, though some will need to adapt their business model. Within the current proposals, we need to have early confirmation from the Financial Services Authority (FSA) that group DC pensions will use adviser charging.

However, there's more to the Retail Distribution Review (RDR) than the two primary strands. There's also an objective to widen the availability of financial products through new forms of sales channels. This can also be positive, by helping provide a steady stream of new recruits to the IFA sector.

Peter Carter is head of product marketing at Met Life UK

Financial advisers have always shown themselves to be extremely resilient and entrepreneurial and there is no reason why that will not continue to be the case no matter what happens with the RDR.

IFAs will adapt and thrive just as they are doing in the current tough market conditions. Despite the recession, advisers are identifying the growth areas and targeting the opportunities.

There is of course plenty of debate about the details and that will continue right up until implementation in 2012 assuming that the FSA sticks to its timetable.

There is not really any debate about the aim of the RDR. Advisers rightly pride themselves on their professionalism and the quality of advice to consumers and the aim of the RDR is ultimately to improve standards of advice and professionalism. Anything which seeks to further improve standards in the industry has to be a good thing.

Advisers will benefit from the RDR as the changes to remuneration practices across the industry will enhance the public's view of IFAs. The move to fee-based rather than commission-based charging structures enables IFAs to quantify their expertise and in the current markets that advice is genuinely valuable.

Andy Curran is intermediated distribution director at Prudential

The RDR is seeking to recognise the specific benefits of independent financial advice while at the same time improving consumer confidence and supporting the adviser industry as a whole. By aiming to improve the professionalism and transparency of the industry the aim is to improve consumer confidence and increase the number of consumers engaging with it. This could result in growth in the market, and therefore more business for advisers.

The key priority focus for advisers should be to look at their overall business model and make sure it is 'fit for purpose' for a post RDR environment. By doing this, and where required, making the transition to sustainable income models, it should help advisers to build long-term mutually beneficial relationships with their clients and to embed real value within their businesses.

Pros

The overall impact of the RDR through the introduction of remuneration transparency, and through qualifications and consistent ethical standards will be a major step forward in the creation of a more professional industry which should benefit the many good advisers that work within it. The move to sustainable economic business models will ensure greater clarity regarding payment for advice and within a strong business model will help to ensure consumers truly value the services they receive from their adviser.

Cons

The vast majority of advisers already operate in a professional manner and therefore may question the need for the RDR and the disruptions that it may cause to them. However, by creating a level playing field that ensures that all advisers have to operate to the same high standards, it will improve the overall consumer perception of the industry and in the longer term this should benefit all those that work within it. The potential loss of older, more experienced advisers, is an issue that the industry must face and it is vital that along with the introduction of new professional standards there is a real focus on how new blood can be attracted to join the industry.

Craig Fazzini-Jones is director and head of design for retirement at MGM Advantage

The target date of 2012 sounds a long way off but I believe this deadline is extremely challenging if the recommendations are to be implemented successfully in a way that consumers understand and buy into.

Pros

The review has the potential to improve the quality, transparency, fairness and reputation of the financial advice industry for the benefit of consumers and this must be welcomed.

Asking consumers to agree up front the charge or fee they're happy to pay the adviser should also end any perception that a product is being sold because it offers the most commission.

This additional transparency of the sales process should also lead to higher persistency rates because consumers will be unwilling to cancel or surrender products that they have 'paid for'.

Cons

To be successful, it's vital that consumers understand and 'buy into' the changes that eventually come out of the review.

Unless all the complexity is stripped from the subject and advisers receive the full support of the FSA in communicating the new ways of working with their clients, the review is doomed to failure.

The last thing this industry needs is to lose high quality, hard-working advisers and the FSA will need to work hand in hand with advisers to achieve success and ensure consumers have access to the right advice.

Andrew Gadd is head of research at The Lighthouse Group

As it stands the RDR, or rather Retail Distribution Review Implementation Plan as I believe the FSA have renamed it, will affect advisers in the main areas of remuneration, the sales/advice split and raising professional standards. I use the phrase 'as it stands' because the final proposed changes have not yet been announced and there were some major changes made between the April and November 2008 versions which could yet be subject to further amendments, and of course there will be a general election next year! In its current form the main challenges for advisers are that they will need to reduce their reliance on initial commission and progress towards 'New Model' advice charging models. Advisers will also need to take action on professional qualifications (for those who do not already have QCA Level 4 or above) now because 31 December 2012 will come round very quickly and the FSA has stated that it is not in favour of 'Grandfathering'. Of course there are also opportunities with an expected smaller number of advisers servicing a larger population of 'mass affluent clients' who will have a better perception and greater confidence in 'professional' financial advisers. There is no doubt that change may be a challenge but change can also be an opportunity.

David Gregory, institutional relationships at Canada Life

The impact of the RDR should, by and large, be very positive. The downsides are perhaps easy to spot at first and may encompass such things as 'more change' equals yet more unprofitable work, at least initially and other perceived negatives may be the increased minimum qualification standard and the move to a new remuneration model.

However, if one embraces this forthcoming change and looks at the RDR as a chance to review the business and client service offering then the pros begin to creep out of the consultation documents too.

For instance, under RDR advisers will need to break down into clear steps each part of the client relationship and advice process, have clear pricing models for each part, un-bundle the cost of the advice from the selected product or solution and demonstrate value at every stage. Once this is done, clients will have a much clearer understanding of what value an adviser offers and will start to overcome the unfortunate misunderstanding that advice is free.

Many advisers have already obtained Diploma standard and beyond and making this a requirement must be seen as a positive move forward. These changes will undoubtedly help secure highly valuable, symbiotic relationships with other professional businesses and as with most change those that embrace it with enthusiasm tend to find value for themselves too.

Natanje Holt is managing director at Dunstan Thomas

For the New Model Adviser who wants to deliver truly independent advice and get paid fees rather than commission the Retail Distribution Review looks like good news.

The current economic turmoil which has resulted in the State taking large stakes in the high street banks is likely to change the landscape significantly in our view, so that the current trend towards re-polarisation advocated by the RDR is likely to be watered down significantly in favour of the bancassurers.

"In addition, there appears to be a move away from principles-based regulation in favour of a more prescriptive regulatory approach as the FSA needs to be seen to throw its weight around more. The recent setting of new FSA suitability assessment templates - the first of which was the pension-switching advice suitability assessment template - suggests a return to a regime much more akin with the old system.

The RDR has the right aims at its heart but in our view it is set to be derailed by wider macro economic events and ultimately by a likely change of Government before it reaches full implementation.

Richard Howells is IFA sales director at Zurich UK

The RDR will be the most fundamental change the market has seen since the introduction of regulation as we know it in 1988. On a positive note it will act as a catalyst to encourage intermediaries to build sustainable business models which will carry embedded value and will reward hard working advisers for their work in both income and capital terms. On the downside, we risk losing good, honest experienced practitioners because they are unable to reach the new qualification thresholds within the transition period. We will all feel the effect of this potential reduction in distribution capacity, not least the consumer who for many years has depended upon the guidance and advice these advisers have offered.

A more efficient market which delivers value for all market participants is essential. This will deliver positive outcomes for the consumer and will help to re-build trust in the market. However, there is a long road to travel before we reach our goal and it is essential that we don't destroy the advisory sector which has served the needs of the retail investor for many years.

Nat Jolowicz is executive director at Quilter

The details of the RDR have not yet been finalised and many aspects remain under review. Full implementation of the RDR is not until 31 December 2012, but it is expected that the current detailed proposals will be broadly those implemented. However it is clear that the current proposals still require significant clarification.

There are three measures regarded as fundamental to the RDR and these will have a significant impact on financial advisers. The measures are: To improve clarity for consumers of the characteristics of different service types and distinctions between them. Advisers will clearly need to complete significant 'due-diligence' on different products to ensure not only that they are suitable but also that the differences between providers of similar products are explained. The adviser must also make clear whether the advice is independent or a sales service.

To raise professional standards. For all advisers the benchmark qualification will be raised to QCA level 4 and possibly higher for designated specialists. One of the major concerns within the industry over this measure is that there are a number of senior advisers who have been 'grandfathered' into the current regulatory regime but may not be able to qualify under the new regime.

To reduce conflicts of interest inherent in remuneration practices and improve transparency of the cost of all advisory services. Advisers will be required to set their own charges as the expectation is that while product providers will be permitted to facilitate payments to advisers they will not be allowed to play a role in the remuneration. This measure is potentially the one that will have the biggest impact on advisers as the 'source' of their revenue shifts significantly from the product provider to the client.

The RDR is in principle a step in the right direction for the consumer of financial advice and services, with an increase in standards and clarity of the product and the role of the adviser. However, the consultation period that is due to start in the summer must ensure that the final regulations are workable across all areas of financial advice and achieve the original objective of the review to improve financial capability and ensure that firms deliver fair outcomes for consumers.

Peter Mann is chief development officer at Skandia

The RDR is already having an impact as advisers consider what needs to change to align with the proposals. It's disappointing to have lost the clear distinction between sales and advice which initially looked so promising. However, the FSA has made it clear that the current proposals are the direction it intends to follow. Therefore advisers are right to focus on how they are going to position their businesses to succeed in the proposed new environment.

A priority now is to ensure that the benefits of independent advice come to the fore. It is crucial that we have clear, fair and not misleading disclosure about the intent, bias and range of choice offered by each type of adviser.

It must be clear that where consumers see 'independent' they have clarity that those advisers are acting as agents on their behalf and where the word independent does not feature the consumer has clarity they are talking to someone who is acting as the agent of a provider.

There is much change ahead, but the IFA of today should now be clear on what they need to do to become the IFA of tomorrow and we will fully support them along the journey.

Mike Morrison is head of pensions development at Axa/Winterthur

Assuming that the RDR reaches a conclusion based on where we are today, then there may be a number of effects on financial advisers.

The prescribed academic level of examination combined with a professional standards organisation will hopefully lead to a higher professional standard, which will help change consumer perception of the industry.

A clear distinction between sales and advice should assist with consumer understanding and, along with the requirement for remuneration to be set by the client and his/her adviser, without the influence of the provider, will hopefully assist in clarifying any conflicts of interest and prevent product bias.

The key must be to improve the image of the IFA profession in the eyes of the consumer, with the hope that the consumer is re-engaged by the financial services industry.

Bob Perkins is technical manager at Origen

RDR has already had and will continue to have a significant effect on the way in which financial advisers operate in the future. To say that the proposals have been contentious would be putting it mildly with the adviser market divided in its support or otherwise of the proposals.

Though the proposals have caused anxiety, particularly among those advisers who have not yet embraced the proposition of fees as opposed to commission, it is probably true to say that most have accepted that further change is inevitable.

If advisers are truly honest with themselves, many might agree that there is a need to continually demonstrate professionalism and openness with their customers. This is nothing new in an industry where business success relies heavily upon customer loyalty and confidence.

Tim Sargisson is managaing director at IFG Financial Services

By bowing to pressure from the bancassurance lobby and allowing sales people to continue to call themselves advisers, the FSA has missed a huge opportunity to differentiate advice from sales. If consumers want independent, impartial advice they should consult an IFA, not bank sales staff.

The FSA needs to re-think the timescale and cost of introducing new qualifications for those already working in the profession. The rise in professional standards, bringing IFAs up to the levels of accountants and lawyers is good news, but not if it means driving out experienced but unqualified advisers.

Now is not the time for new regulation or new regulators. The Independent Professional Standards Board proposals need to be studied to see how they might work with existing arrangements, seek members' views and respond to the FSA before we know the real impact.

The FSA has missed another opportunity in failing to bring about a long stop to financial services. AIFA will continue to campaign for members to enjoy the same legal protection as every other firm in business.

There is no promised regulatory dividend for good firms. Shame. Finally, at a time when all businesses are struggling to cope with the economic turbulence it is deeply distressing that the regulator is proposing to disproportionately increase small firms' capital requirements. The move to expenditure based calculations will be detrimental. For example, the potential impact on a firm of 20 advisers with approximately £1.6 million costs could see its prudential requirements radically increase from around £10,000 to around £300,000.

Jamie Shepperd is chief executive officer at Courtiers

The RDR provides opportunity for financial advisers to evolve into a respected and trusted profession, to rank alongside accountants, lawyers and doctors in the mind of the consumer.

Move from one side of the country to the other, and you would change your lawyer to one who is more local. However, private clients are unlikely to switch financial adviser because they often believe they have found the only trusted professional in the industry.

RDR significantly raises the education bar, ensuring advisers have a higher understanding of tax, investments and risk. Note to the FSA: Do not stop at level 4 in December 2012, please do not stop! By December 2016 chartered status must be the minimum standard in order to win consumers' trust.

Removing product providers' influence over remuneration is fundamental to financial advice becoming a trusted profession. Agreeing repeatable remuneration for the service delivered to a client on a day-to-day basis will change the industry, creating sustainable business models, moving away from the boom and bust of indemnity commission. Along with higher standards of education, this will establish a trusted profession that will regenerate the industry with an inflow of new recruits fresh out of university.

Stuart Tragheim is distribution strategy and business development director at LV=

It is widely expected that the number of independent financial advisers will reduce over the short term as a result of the Retail Distribution Implementation Programme (RDIP), with a small number moving into the non-independent sector. Short term, this may reduce the availability of advice to the mass market, but in the longer term IFA numbers should increase as more consumers recognise the high professional advice that IFAs provide. The majority of IFAs are already qualified or on track to meet the new standard so the fall out may come from those nearing retirement. Improved professional standards will result in better outcomes for customers.

Removing product provider influence from remuneration is a positive step, and the industry must embrace this important change. Factoring for regular premium policies could well be a good move for the market if there is sufficient rigour in the standards required for it to operate properly, as otherwise it could be seen as indemnity commission by another name. Furthermore, adviser charging should produce a positive outcome for customers over time, once it is fully embedded and understood by customers; it could cause some confusion initially, however, because it's a new concept for customers and IFAs alike.

Personally, I have some concerns on the likelihood that all of the changes will be able to be implemented by the end of 2012. There are some real challenges for product providers, specifically around the IT changes required - including the potential need to make legacy products compliant with the new regime! However we must maintain momentum if we are to deliver the real prize of creating an industry that is more trusted and where consumers feel more engaged.