RDR: bring advice to life

The transition to adviser charging has been a main challenge post-RDR, so quality and clarity when presenting propositions is the way forward, says Darren Laverty

The Retail Distribution Review (RDR), introduced on 1 January 2013, has been good in many ways. For a start, wealthier clients are benefiting from a better and more professional financial adviser relationship. And industry standards have clearly risen, and that can never be a bad thing. However, lots of reports have highlighted its negative impact.

In September, we (Foster Denovo) published the findings from a post-RDR research survey conducted on the financial advisory sector. The headline from that indicated that 8 per cent of advisers expect to cease trading, and a further 45 per cent thought their business would either contract or stay the same, following RDR.

At the time, I said it was concerning to see that such a large segment of our industry predicting their business will fail to grow over the next three years. Equally, the 8 per cent figure would equate to circa 1,700 advisers in today's market, taking us to below 20,000 financial advisers (excluding bank and building society advisers and other advisers).

A lot of good advisers are now choosing to leave the industry. These are professionals with integrity and experience. Sadly, however, their current skill sets are no longer enough to realise success (as they might have previously).

Today, more than ever, the 'product' being pitched is the adviser; before, it was the product itself. A large number of advisers have worked for a long time, following the same practices and principles that they always have. The need to improve their soft-selling skills, to review areas like cash-flow modelling and to market themselves was previously seen as detracting from their day jobs. Clearly for many, the change needed is seen as a task too far and has resulted in their decision to leave the sector.

RDR has forced advisers to be selective about who they deal with, which is very sad. Many clients do not meet the criteria for the type of client the adviser would like to deal with as the risk and reward has become imbalanced.

There is no doubting that RDR has presented a number of challenges, and, according to our survey, the transition to adviser charging is a key part of this. To market advice and an ongoing service to their clients, advisers must think about presenting their proposition with quality and clarity, bringing it to life, and highlighting the vital role it plays.

More than one third (38 per cent) of those we surveyed said discussing fees with clients had proved difficult. In addition, some 47 per cent of advisers also feel it will be difficult to spend chargeable time in front of clients.

However, returning to my initial comments, 37 per cent of the advisers we surveyed advised that RDR has been positive for their business, with only 18 per cent stating that it had not been positive. Some 36 per cent have seen profits increase post-RDR, although 23 per cent said that profits have remained flat or decreased.

At the time of the survey, Roger Brosch, Foster Denovo's CEO, said: "The sector has come a long way, but there is still some way to go… it will be the most adaptable that survive and prosper in this new world."

I couldn't agree more.

 

Darren Laverty is sales and marketing director at Foster Denovo

Request a copy of the Foster Denovo Financial Adviser Post-RDR Survey 2013 white paper here

More opinion on RDR