There is much debate and mistrust about the upcoming RDR changes within the financial services industry. With clearer charging structures (from the client’s perspective), differentiation between types of advice (genuinely independent vs restricted) and higher standards of adviser qualification, the principles of RDR are positive and logical.
In practice it means, for some businesses, a change in structure, new client segmentation, hard work passing new examinations and maintaining professional standards and finding new ways of communicating with clients.
It would seem logical to say that those who come through the RDR process will excel. Surveys indicate that a fairly significant number of advisers will leave the business after 2012 and this market contraction can only positively serve those who remain. Change is afoot for us all, but some businesses are more prepared than others and the timeframes are clear for all to see, so we all need to be make the necessary changes gradually rather than waiting for the 11th hour in December 2012.
Let’s face it - regulation changes are nothing new. The late 80s saw a complete change in regulation and the way retail financial services were to be provided to clients and in 1994, we saw the introduction of commission disclosure, which aimed to reduce contract charges by allowing investors to see transparent costs and enabling them to shop around. Whilst Armageddon had been predicted, the industry weathered that storm too.
Much of the debate about RDR rages around whether the consumer will in fact be better off as a result – and as with most things, it’s probably a set of swings and roundabouts. There will be clearer communication and clearer charging from higher qualified advisers – but there will be fewer advisers (at least initially) which could reduce choice. Over time, more and more qualified advisers will come into the market and issues of choice will be addressed, whilst everyone will soon become familiar with the new ways to charge. The soundest IFA businesses have always been those that put the client first – the ones who do not ‘product push’ but who know their clients over the long term and understand how to add genuine value – and who appreciate that some clients make you more money than others, but everyone must be treated fairly.
A commitment to solid business processes and efficient handling of compliance and competitive charging is now an even greater imperative. With a continued emphasis on putting the client first, on communicating the changes to them and always being there to explain any concerns and questions they might have, those same businesses have little to fear from RDR in 2013 - and plenty to gain.
