The Review of Financial Advice (RFA), as it is known, was conceived in the wake of the UK’s Retail Distribution Review, a package of regulatory reforms governing the way financial advice in the UK is provided and paid for, which takes effect on 1 Jan 2013.
The JFSC’s unveiling of the results of its RFA consultation comes less than a week after Guernsey – Jersey’s English Channel neighbour and sometime rival – launched a consultation of its own on whether it should adopt a Retail Distribution Review (RDR) similar to the UK’s.
As reported, that consultation runs until 2 Jan 2013, the day after the RDR takes effect, and the Guernsey Financial Services Commission has gone on record as stating that it believes Guernsey “should not immediately follow the UK” with an RDR scheme of its own, “but instead wait and see what happens in the UK and elsewhere”.
The Isle of Man is also implementing a version of RDR, which like Jersey’s RFA, takes effect at the beginning of 2014 and focuses on raising the standards of advisers’ qualifications, according to John Spellman, the island’s director of financial services.
Feedback paper
The new JFSC Feedback Paper, as the consultation document is known, follows the JFSC’s publication in August of 2011 of its position paper on the matter.
The document is described as covering those areas in the UK’s RDR that were not already dealt with under existing Jersey legislation, including the use of commission to remunerate advisers, and the level of qualification advisers should have.
Among its key features is a new legal distinction between so-called professional clients and non-professional, or retail, clients, which is described as having “a bearing on both the qualification requirements for, and the remuneration of, financial advisers”.
Businesses involved in such areas as fund administration and fund management are not covered by the RFA. They will still be able to pay commissions to Jersey-based advisers or advisers with Jersey-resident clients, but with the proviso that in some circumstances the advisers may not be permitted to retain the commissions.
Other key features:
- In general, advisers will be required to hold an appropriate qualification at Qualifications and Credit Framework (“QCF”) level 4 or above in order to be able to give financial advice to retail clients in, or from within, Jersey
- In general, retail clients resident in Jersey will not be permitted to pay for the advice they receive through commission payments
Exception for ‘professional clients’
Even after 31 December 2013, those advisers who look after individuals who qualify as “professional clients” will not be required to meet the QCF level 4-or-above requirement, nor will they if they have retail clients “who qualify to be and opt to be treated as professional clients”, the JFSC said, in a statement outlining the new RFA requirements.
In addition, employers of advisers advising such professional clients may continue to receive commission payments even after 31 December 2013, the JFSC said.
The JFSC said it is willing to consider representations made to it by businesses on the achievability of the 1 Jan 2014 deadline. However, it said it added that it would expect all Jersey financial advisers “to apply the categorisation for new clients taken on after 31 December 2013”.
Reaction
As it happens, few Jersey wealth managers seem likely to have a problem meeting the deadline, interviews with several revealed.
The reason, they say, is because the advisory industry on Jersey has been moving for some time in the direction of higher qualifications, and away from the use of commissions.
“The RFA has formalised a trend that was happening in the marketplace here anyway,” said Marc Farror, director and head of business development for the Jersey operation of Vistra, the Geneva-based trust and corporate services provider.
While the new regulations will require Jersey advisers to have QFC Level 4 qualifications, he went on, a lot of the island’s banks and other institutions are demanding that their advisers meet an even higher standard, the CISI Level 6 Certificate in Private Client Investment Advice & Management.
"It is an example of the belts and braces way they like to do things here in Jersey, not just meeting the standards required but exceeding them," Farror added.
Alan Binnington, private client director at RBC Wealth Management in Jersey, shared Farror’s assessment, noting that the types of smaller advisory businesses the UK’s RDR was aimed at are not typical of Jersey, where wealth managers tend to be larger and have wealthier clients.
To read or download the JFSC’s Feedback Paper on the RFA, click here.
