Eagle-eyed firms are set to fly high in 2013
REGULATION is as dull for consumers as it is frustrating for businesses. This is why the average man or woman on the street hasn’t heard of the retail distribution review (RDR), which revolutionises the regulation of financial advisers. However, it does matter. For better or worse, it will change the way that financial advice is delivered, most notably by ending commissions from 1 January 2013.
With the RDR deadline drawing ever-closer, one might expect the industry to be well-prepared for the changes that 2013 will bring. However, Remus Consulting and Distribution Technology think those who are fully prepared are a rare breed. As such, they have developed the RDR Zoo: “A light-hearted way to classify organisations according to their approach to RDR.”
If your money manager is an albatross or ostrich, remaining unprepared for RDR, they could be forced to sell or go bust – leaving you with the headache of finding a new company to look after your wealth.
THE SALMON
CHARACTERISTICS
Is clear on its destination.
But has lots of obstacles to leap over along the way.
EXAMPLES
Some adviser firms, which are pro-RDR, but historically commission-based.
Some banks.
Some brandassurers.
HOW THEY CAN IMPROVE
Clarify the operational and financial model challenges.
Develop a clear roadmap to implementation.
THE ALBATROSS
CHARACTERISTICS
A large and endangered species.
Historically reliant on independent financial advisers for distribution.
Uncertain what customers want and how to reach them.
EXAMPLES
Life companies who have used commission to control sales.
Fund managers who have used commission to control sales.
HOW THEY CAN IMPROVE
Ensure basics are in place around systems for adviser charging.
Develop scenarios for the impact of future changes to market and consumer changes.
THE EAGLE
CHARACTERISTICS
A rare breed – with tremendous acuity of vision.
It is likely to be ready for RDR or well on the way.
EXAMPLES
“New model adviser” firms, already well qualified and predominantly fee-based.
HOW THEY CAN IMPROVE
These firms are well placed, but can still maximise their opportunity by segmenting clients, defining value-added propositions and minimising risk.
THE MOLE
CHARACTERISTICS
Has tunnel vision.
Likely to be bogged down in the detail.
EXAMPLES
Some adviser firms typically sceptical of RDR.
Some platforms unsure of their role and future market demands.
HOW THEY CAN IMPROVE
Focus on the fundamentals of the proposition, channels and customers.
Develop an operating model with enough flexibility to adapt to regulatory requirements.
THE OCTOPUS
CHARACTERISTICS
Has lots of arms.
Running multiple models and simple and multiple business units so not clear who is deciding the way forward.
EXAMPLES
Banks, especially the larger groups spanning retail, wealth management and private banking.
HOW THEY CAN IMPROVE
Select a high-priority and/or relatively simple area and pilot a solution.
THE BEE
CHARACTERISTICS
Very busy.
They know what they need to do, but there are so many necessary changes that they are in danger of being distracted.
EXAMPLES
Large companies already implementing regulation (e.g. Solvency II).
Smaller firms inexperienced in dealing with major change.
HOW THEY CAN IMPROVE
Recognise the need for additional help.
Allocate time, resources and budget for changes.
THE OSTRICH
CHARACTERISTICS
Has its head in the sand.
Hoping that RDR will be delayed.
EXAMPLES
Typically smaller adviser firms who have been opposed to RDR from the start.
HOW THEY CAN IMPROVE
These firms are at risk of leaving it too late.
They should consider options for sale or exit.
Or they will need to make plans to transform into a salmon (quickly).