Posted on 19 July 2012 by JPMAM UK

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The Retail Distribution Review, or RDR, is beginning to receive more media attention ahead of its implementation at the end of this year. But what is the RDR, and what impact will it have on investors?

A new era for investment advice

The RDR was conducted by the UK’s financial services regulator, the Financial Services Authority, to investigate how the advice that is provided by product providers and advisory firms to their customers could be improved. In particular, the review focused on finding ways to ensure that investment advice is always fair and unbiased.

As a result of the RDR, several changes are being introduced to the way in which investment advice is provided:

• Advisers will need to clearly state the type of advice that they offer to customers. For example, whether they offer independent advice and can recommend products from across the industry, or whether the advice they offer is restricted to specific areas or a smaller range of products.
• Advisers, whether independent or restricted, will be required to reach a minimum level of professional qualification.
• Advisers will no longer be able to be paid by commission from fund providers and will instead be expected to agree charges with their clients upfront. The aim is to give customers greater transparency over the cost of the advice given, and inspire confidence that the advice will not be biased by commission.

Options for investors

You have two options if you want to make an investment. You can either invest through a financial adviser, or you can invest directly with a fund provider.

Investing via a financial adviser

Following the introduction of the RDR changes, the fees for financial advice will need to be agreed upfront by the investor and adviser. In most cases, advisers will no longer be able to claim commission from fund providers. This means that you may also notice changes to the charging structure of some funds and the introduction of new share classes. Your relationship with any existing financial adviser may also change as a result.

If you have a financial adviser, you should contact them if you have any questions about the changes they are making to their fees in order to accommodate the RDR rules. Advisers will be expected to ensure that any investments they make on your behalf after 31 December 2012 are compliant with the new rules.

Investing directly with a fund provider

You also have the option to ‘do it yourself’ and invest directly with a fund provider. Many companies, including J.P. Morgan Asset Management, have a broad range of funds to choose from as well as offering online investment platforms designed to help you build an appropriate investment strategy for your needs.

Find out more about the wide fund range available on our online platform which includes funds from several leading UK fund providers.

If you have any further questions on the RDR and how it may affect you, please contact your financial adviser or call our UK-based Investor services team on 0800 731 1111. Our lines are open Monday to Friday, 9am to 5.30pm. Please note telephone lines may be recorded and monitored for training and security purposes.