Chris Davies: 9 tips for getting ready for RDR

As the clock ticks down to RDR ‘D’ day we are now witnessing a flurry of activity within the industry which will build over the coming months to full blown change management strategies and maybe panic measures taken to comply with RDR conditions. As with any enforced change this brings along challenges to and resistance by those affected. My new book, Winning Client Trust, gives key strategies that will help re-focus the mind and give renewed vigour to your RDR implementation strategy and journey ahead.

1: Flip the funnel: Too many organisations concentrate on the big picture for core strategies such as client acquisition, when focus on what the business already has in terms of loyal clients’ who, if nurtured through the RDR process, will form the bedrock of success post 2013. Do not just segment the client bank, particularly with a focus on financial capital. Focus on the relationship capital and the client bank DNA will encourage stronger more trusted partnership client relationships and widen the client bank considerably.

2: Crystal clear market positioning: IFAs and wealth managers need to be clear on independent or restricted structure, product providers need to assess the benefits of such initiatives as HMRC Treasuries paper on simple products or the Social Market Forums product  ‘Kite-marking’ project. Platforms need to ensure they are as transparent as can be. There is still the opportunity to champion a form of simplified advice; definitely in a slightly different guise to the recent FSA simplified advice paper.

3: Know the rules: The FSA Conduct of Business has set objectives and set rules for January 2013. The FSA website and RDR related consultancy papers clearly sets out the rules:

  • Ongoing charging: Only to be levied when the consumer is paying for on-going services.
  • Ban on commission: No rebates allowed and remuneration is a transaction between the client and the business.
  • Adviser Charging: Intermediated advice is chargeable and time management is therefore key. VAT is still being defined, yet this will focus on intent of advice, not predominance of service as previously thought.
  • Legacy business: As has now been confirmed with paper CP11/26 legacy trail commissions are banned post 2013. A transitional provision has been added where products may continue to pay commission if left unchanged and only amended post 2013.
  • Rebating banned: With no timeframe, the FSA’s intent has been given and thus all interested parties must now prepare for a rebate free market. 

4: Engaging the change process: All market participants should now be well on the road to RDR implementation, but it’s a marathon not a sprint, those who think they are already ‘there’ should re-assess their progress, take time out to ensure RDR rules are truly complied with and those yet to get going should not be afraid to admit this and seek support.

5: Define your brand: A tendency in any change management strategy is to follow the herd any market participant who employs a counter-intuitive stance may stand out from the pack. IFAs should ensure independence; specialist or restricted status always adds value for the customer. Life Company’s focus should be on relationship capital, keeping their distribution arms focused on cutting edge technology and services to keep client loyalty and Investment managers need to design investor friendly funds that are transparent and fairly charged.

6: Focus on your strengths: Any Bank, IFA, product provider, wealth manager, wrap or platform provider has at least one core strength within the business. This now needs full focus and at the core of any marketing strategy. Consumers want and need a strong, confident market, particularly in these deep dark times.

7: Employ transparency: Everyone will benefit from a clear and open service proposition come 2013. Fees, charges, product features and benefits, and clear communication are all integral to the benchmarking of a firms RDR best practice.

8: Investment funds: It is becoming quite evident (with point 7 in mind) that fund share classes will have to fall into 3 camps. A) Pre-RDR charged including the price of advice, B) Factory Gate Priced excluding adviser remuneration and C) Platform friendly. Available asset managers and discretionary fund managers may see mergers and acquisition activity over the coming months to decrease administrative costs and reduce share classes, which will mean a more competitive market and better value for the consumer.

9: Engaging, empowering and enlightening client financial capability: With behavioural economics in mind, all market participants should now be focused on client friendly technology, designed around the consumer needs incorporating products and services that empower customers to a better understanding and capability to manage their investments for a more secure future.

Chris Davies is director of Engage Partnership