Claire Whitelegg, Deputy Director Funds and Investment Services - Supervision Division, Isle of Man Financial Supervision Commission explains the new standard for Isle of Man Financial Advisers
For many years, the Isle of Man Financial Supervision Commission (FSC) has worked closely with local advisers over standards of advice for retail investors. Over the last 2 years this work has been tied up under a Retail Distribution Review (RDR) banner; but Manx RDR is different. It draws from the UK RDR approach but is designed to meet the needs of the Manx marketplace and the Manx system.
Manx RDR is not a mirror of the UK regime, which came into effect on 1 January 2013.
In some areas Manx RDR and UK RDR are similar, for example:
- Anyone providing financial advice to retail investors from 1 January 2014 must demonstrate a relevant level 4 standard of competence. Advisers can do this through a UK RDR route or through the Isle of Man Alternative Assessment which has been specifically developed for senior professionals on the Isle of Man by the Chartered Institute for Securities and Investments.
- Advisers are already required to undertake and evidence relevant Continuing Professional Development; from 1 January 2015 it is planned that advisers will need to hold an Isle of Man equivalent to the UK Statements of Professional Standing.
- The Financial Services Rule Book is currently being reviewed to ensure that the disclosure requirements provide sufficient transparency about advisers’ status and the nature of services. Any changes to the Rule Book are planned to take effect from 1 January 2014.
The FSC continues to monitor progress of individual financial advisers towards the level 4 standard. As at February 2013 only 13% of advisers had 3 or more examinations to take. Since that date we are aware that a large number of advisers have continued with examination successes. In April 5 candidates successfully demonstrated their competence through the Isle of Man Alternative Assessment route. The next formal update has been requested from advisers and the results will be available at the end of June.
In one significant area Manx RDR and UK RDR are different; there are no current plans in the Isle of Man to ban adviser remuneration via commission and mandate a system of customer fees.
The FSC has considered the UK approach and approaches elsewhere, including the other Crown Dependencies and Europe. The FSC is conscious that in a small market regulation of this nature could skew the range of products available to clients, and potentially make financial advice beyond the means of some small investors. The FSC is not mandating how remuneration is made, but is continuing to require clear disclosure of remuneration to investors so that they can make an informed choice. The FSC will continue to monitor this area in its supervisory work with licenceholders.
In conclusion, the FSC is committed to ensuring a fair market place for retail investors. In developing the regime the FSC has taken account of the local market place and international developments. The resulting Manx RDR regime is intended to be a balanced approach to the issues that retail advice presents. The overriding considerations for the FSC remain how advisers demonstrate competence and can advisers positively demonstrate the suitability of recommendations made for each retail client’s needs; this does not always equate to the cheapest available option.
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