Morningstar
RecommendedMorningstar AwardsWhats New IconETFs Whats New IconIncome Week Whats New IconThematic Investing Whats New IconSign Up to Our Newsletters Open Window Icon
Professional Investor

RDR Has Had "Little Impact" on Most Advisers

Less than 17% of advisers have felt a notable impact on how they cater to clients as a result of the government’s Retail Distribution Review, which came into effect at the beginning of 2013

Holly Cook 27 November, 2013 | 5:40PM
Facebook Twitter LinkedIn
Font-Size

Less than 17% of advisers have felt a notable impact on how they do business as a result of the government’s Retail Distribution Review, which came into effect at the beginning of 2013. Prior to January of this year, much had been made of the impact this regulatory change—which encompasses advisers switching to a fee-based payment model, the introduction of obligatory qualification levels and clearer labelling of ‘independent’ and ‘restricted’ advice—and the disruption it would cause the advice industry.

A Morningstar survey conducted at the Institute of Financial Planning’s recent annual conference revealed that just three of the 18 advisers questioned had seen the RDR bring about change in how they conduct their businesses. The remaining 14 advisers reported very little impact from the government’s change.

It’s worth noting that attendees to such an event are likely to be those advisers who are more progressive and forward-thinking, so being long prepared for regulatory change may be in the make-up. Indeed, one adviser said his firm had been “RDR-friendly for the last 17-18 years.”

Of those that did report an RDR impact on how they give advice, one participant celebrated the government initiative, welcoming the focus on fees and the opportunity for her firm to ensure they are adding value for money for clients. Another said it had been a steep learning curve but she now felt her firm was well positioned to cater to clients in the current market. In a turn up for the books, our final interviewee said the RDR had brought about the unexpected result of forcing his firm to increase its fees as they discovered they were charging clients just a third of what many other financial planners were asking. The fee increase has enabled his firm to expand the number of advisers they employed, he said.

The vast majority of those surveyed said they had been ‘RDR-ready’ for a number of years, with one noting that the process can take several years to achieve but that many firms started this process a long time ago.

Want to know more about RDR? Watch our RDR Basics video.

TAGS

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn
Font-Size

About Author

Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures

The Morningstar Star Rating for Stocks is assigned based on an analyst's estimate of a stocks fair value. It is projection/opinion and not a statement of fact. Morningstar assigns star ratings based on an analyst’s estimate of a stock's fair value. Four components drive the Star Rating: (1) our assessment of the firm’s economic moat, (2) our estimate of the stock’s fair value, (3) our uncertainty around that fair value estimate and (4) the current market price. This process culminates in a single-point star rating that is updated daily. A 5-star represents a belief that the stock is a good value at its current price; a 1-star stock isn't. If our base-case assumptions are true the market price will converge on our fair value estimate over time, generally within three years. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Morningstar Star Rating for Stocks, please visit here

Quantitative Fair Value Estimate represents Morningstar’s estimate of the per share dollar amount that a company’s equity is worth today. The Quantitative Fair Value Estimate is based on a statistical model derived from the Fair Value Estimate Morningstar’s equity analysts assign to companies which includes a financial forecast of the company. The Quantitative Fair Value Estimate is calculated daily. It is a projection/opinion and not a statement of fact. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Quantiative Fair Value Estimate, please visit here

The Morningstar Medalist Rating is the summary expression of Morningstar’s forward-looking analysis of investment strategies as offered via specific vehicles using a rating scale of Gold, Silver, Bronze, Neutral, and Negative. The Medalist Ratings indicate which investments Morningstar believes are likely to outperform a relevant index or peer group average on a risk-adjusted basis over time. Investment products are evaluated on three key pillars (People, Parent, and Process) which, when coupled with a fee assessment, forms the basis for Morningstar’s conviction in those products’ investment merits and determines the Medalist Rating they’re assigned. Pillar ratings take the form of Low, Below Average, Average, Above Average, and High. Pillars may be evaluated via an analyst’s qualitative assessment (either directly to a vehicle the analyst covers or indirectly when the pillar ratings of a covered vehicle are mapped to a related uncovered vehicle) or using algorithmic techniques. Vehicles are sorted by their expected performance into rating groups defined by their Morningstar Category and their active or passive status. When analysts directly cover a vehicle, they assign the three pillar ratings based on their qualitative assessment, subject to the oversight of the Analyst Rating Committee, and monitor and reevaluate them at least every 14 months. When the vehicles are covered either indirectly by analysts or by algorithm, the ratings are assigned monthly. For more detailed information about these ratings, including their methodology, please go to here

The Morningstar Medalist Ratings are not statements of fact, nor are they credit or risk ratings. The Morningstar Medalist Rating (i) should not be used as the sole basis in evaluating an investment product, (ii) involves unknown risks and uncertainties which may cause expectations not to occur or to differ significantly from what was expected, (iii) are not guaranteed to be based on complete or accurate assumptions or models when determined algorithmically, (iv) involve the risk that the return target will not be met due to such things as unforeseen changes in changes in management, technology, economic development, interest rate development, operating and/or material costs, competitive pressure, supervisory law, exchange rate, tax rates, exchange rate changes, and/or changes in political and social conditions, and (v) should not be considered an offer or solicitation to buy or sell the investment product. A change in the fundamental factors underlying the Morningstar Medalist Rating can mean that the rating is subsequently no longer accurate.

For information on the historical Morningstar Medalist Rating for any managed investment Morningstar covers, please contact your local Morningstar office.

For more detailed information about conflicts of interest, including EU MAR disclosures, please see the “Morningstar Medalist Rating Analyst Conflict of Interest & Other Disclosures for EMEA”here

Select Your Site Edition To make sure the site is relevant to you, we need to know if you’re an individual investor or a financial professional.