Definition of retail distribution review
The retail distribution review, or RDR, is the name that has been given to a new set of rules that will be enforced in the UK from the beginning of 2013. The rules are aimed at introducing more transparency and fairness in the investment industry. The most significant change is that financial advisers are no longer be permitted to earn commissions from fund companies in return for selling or recommending their investment products. Instead, investors now have to agree fees with the adviser upfront. In addition, financial advisers now have to offer either "independent" or "restricted" advice and explain the difference between the two – essentially making clear whether their recommendations are limited to certain products or product providers.
retail distribution review (RDR) effects
Online investment sellers are expected to be the short-term winners as clients are expected to balk at paying overt fees and turn instead to online platforms that sell investments without advice. In addition, the ETF industry is expecting a windfall because the changes will bring the rest of the industry in line with common practice in the ETF industry – one of the reasons ETF providers have been able to keep costs low is by not paying commissions to advisers.