The Impact of Retail Distribution Review on Aviva - Research Proposal Example

An Analysis of the impact of Retail Distribution Review on Aviva. Table of Contents Table of Contents 3 Summary 4 Financial Services Regulation 4 RDR(Retail Distribution Review): Background 5 Aviva: An overview 6 Objectives and related Research Questions 7 Research Methodology 8 Reference 9 Summary Aviva is one of the big names in the financial institutions and insurance industry in UK. In the wake of trembled situation of the UK financial institutions, Financial Services Authority has come up with Retail Distribution Review to treat the symptoms and reasons affecting the industry. This paper is an effort to get into more insight of RDR and the inherent regulations are discussed in relation to Aviva, the insurance company. Financial Services Regulation The financial service industry includes a number of investment banks, broking firms, commercial banks, financial advisers, insurance companies. In recent years, a number of companies have entered in this industry and it is the largest industry in the world. The financial regulatory bodies have implemented a wide range of regulation in this industry causing changes in its features. Financial Services Authority is responsible for the introduction of regulations and control in the financial services industry. The framework of regulatory bodies considers all the financial products that are consumed by general public. As the industry involves customers, financial advisors and financial service providers, there can be conflicts of interest between customers and financial advisors or company and financial advisors. This is called agency problem which leads failure of customers’ trust on market. Financial regulatory bodies aim to employ certain regulations to resolve these issues. RDR (Retail Distribution Review): Background The Financial Services Act had been attempting to realise the retail market of investment and the reason for failure of customers trust. In order to retain the public confidence and trust the FSA introduced the Retail Distribution Review (Personal Financial Society. 2010). This retail review was launched in June targeting the standard and quality of financial advisory services given to customer in the financial services industry. Through the RDR, the FAS aims to develop a retail market where customers easily understand the information; the financial firms fairly treat their customers and the customers will have much confidence to invest in the market (CISI. n.d.). The approach has been quite influential to keep the resilience, efficiency and the productivity of the retail investment market. RDR is supposed to modernise the industry by bringing back the customer confidence to the market by offering them the best choices to fulfil their pension and savings needs. RDR not only approaches to solve the significant issues influential behind some of the long time problems, but it also considers he operating procedure of the overall market of retail investments. At the same time, the authority was concerned about the future operational procedures of the retail industry. To maintain a control and authority over the fair operation of the investment retail industry, RDR has considered and modified a number of previous policy initiatives. The modifications and introduction of some new policies has been carried out taking due consideration of all of the stakeholders’ interests including the practitioners and the consumers’ representatives in this industry. Three fundamental facts have been identified which are significantly influential to shape up the interaction and communication between the industry and consumers. The identified factors include the intensity of clarity which the firms maintain while explaining the services to their customs. Addressing the prospective of the remuneration of the advisers to distort the outcomes for the customers is another significant factor which has been taken into consideration. The government has emphasised more on the required qualification of the investment advisers and enhanced the same to meet the customer requirement of a much better service in the retail investment market. The framework would make the investment advisors to be responsible for their own knowledge bases, skill sets and practices. The investment advisors must understand the transition of the standards. Surely, the changes are very much significant and challenging (FSA, 2010). Some parts are definitely very much in dilemma about the significant changes. However looking at the situation and appetite of the market, it can be said that the changes would bring a new arena in the retail investment industry. Aviva: An overview Aviva is one of the leading players in the European insurance industry. However the arena of Aviva is spread around the globe. Aviva offers both life and general insurance. The long term savings segment mainly focuses on pensions, life insurance, unit trusts and other financial products. Aviva is expanding its long term savings program to the Asian markets, USA and the Australian market. In the general segment products, Aviva offers non life, property and causality products like auto and fire coverage. The organisation provides asset management globally. In the UK region, the organisation also offers private medical insurance through its employers. The company operates most of its business under the banner of Aviva. However the organisation operates its local business under some local brands including RAC (Hoovers, 2010). The organisation employs over 54000 employees who serve about 50 million customers in over 28 countries over the globe. The brand has been committed to offer the best choice to their customers in various arenas of financial products, be investing in the future, guarding against the unexpected and protecting the assets which are important to the customers. Objectives and related Research Questions The objective of this paper is to analyse the impact of the RDR on the financial service sector and how Aviva is going to response with the implication of RDR and what are the benefits that will receive. This paper will also disclose the market situation after the implementation of the RDR. Objective 1. To evaluate the nature and scope of RDR. Research Questions: What are the objectives of RDR. Which are the significant regulations in Retail Distribution Review? Objective 2. To evaluate the impact of RDR on Aviva. Research Questions: How the retail industry has changes its activities in alignment with the RDR regulations? Being an element in this industry how the organisation is implementing and handling the changes in the industry? Objective 3. To get an insight into the significance and desirability of the RDR regulations. Research Questions: How significant and desirable are the RDR rules and regulations in compliance with the business of Aviva? How RDR can be suitable and desirable in the event of financial crisis? Research Methodology The paper will be based on secondary research procedures with due consideration to all the acquired quantitative and qualitative research data and information. Various quantitative data have been collected using various graphs, figures and tables. Secondary sources like books, journals and newspapers have been crucial to carry on the required research for this paper. Secondary data sources have been taken from the reliable sources. The FSA and RDR website has been used to get the objectives and implication of RDR. The news articles from BBC, Reuters etc have been used. The surveys by the government organisation have also helped to get the overall results of RDR on the market and customers. The comments from various critics have also been considered. All these data have been used to assess the impact of the RDR on the operation of Aviva. Reference CISI. No date. Background to the RDR and the Professionalism Working Group. Available at: http://www.secinst.co.uk/bookmark/genericform.aspx?form=29848780&url=rdrbackground. [Accessed on June 11, 2010]. FSA. 2010. Retail Distribution Review. Available at: http://www.fsa.gov.uk/Pages/About/What/rdr/index.shtml [Accessed on May 17, 2010]. Hoovers. 2010. Company Description. Available at: http://www.hoovers.com/company/Aviva_plc/hkyyci-1.html [Accessed on May 17, 2010]. Personal Financial Society. April 2010.Guiding the Profession on RDR. Available at: http://www.thepfs.org/downloaddata/RDR_A_Background.pdf. [Accessed on June 11, 2010]. Read More