Retail Distribution Review and its Impact on Avivas Market Performance - Essay Example

The role of financial advisors in such cases has assumed new perspectives with most of the advisory services being focused on marketing specific financial products to the customers rather than highlighting the potential benefits, scope, and efficiency of different products.

 The financial advisor receives a commission based on the sales of the specific financial product. In view of this lack of transparency and increasing variation in financial charges by service providers are considered the primary reason behind the framing of the Retail Distribution Review (RDR).

The RDR was initiated by the Financial Services Authority (FSA) in June 2006 with the primary objective of shifting the retail financial service industry away from commission-based revenue paid by customers for financial advice. The RDR proposes to remove such practices and provide a ground for fair customer treatment. “Under the proposed FSA rules, an advisory firm will be prohibited from holding itself out to a retail client as acting independently unless the advisory service that it offers to the client is unbiased and unrestricted; and based on a comprehensive and fair analysis of the relevant market” (Smith, 2009).

The key features of the RDR are improving the clarity for customers about financial advisory services, addressing the potential for remuneration bias, and increasing the potential standards of advisors (Davies, 2009). The RDR will have an impact on any financial institutions or agencies involved in retail investment dealings, trading and professional bodies, financial product providers, advisory firms, distributors, investment advisors, banks, building societies, mutual funds, and consumers (Davies, 2009).

To gain an improved understanding of the impact of RDR on retail investment markets, firms should conduct an impact analysis to evaluate the effects of this framework on their business (KPMG, 2010).