MM Leader: RDR impact must not be underestimated
With the RDR deadline only 19 months away, there is growing concern that firms are underestimating the radical business transformation changes that will be required.
Understandably, the focus for many has been on obtaining the new qualifications. But firms may well find that adapting their business models to abide by the RDR rules on charging and independence are a tougher hurdle to overcome.
At a Money Marketing round table event last week, a range of experts, many of whom spend their time visiting IFAs across the country, were united in their view that the advice sector is in a state of denial.
A year and a half until the new rules are due to be implemented, this is a dangerous state of affairs.
Important decisions need to be made about the type of charging structures that will employed and what client segmentation strategies are required.
This has not been helped by a lack of clarity from regulatory bodies. There is still a huge amount of confusion regarding the issue of VAT, which extends beyond adviser charging to other areas of the market. A clear set of notes from HM Revenue & Customs is needed.
Firms also await a definitive answer on whether cash rebates will be banned, a decision which may hit charging strategies.
However, despite these regulatory clouds, there are many things advisers should be doing to prepare themselves for 2013. There is no point in passing all the required qualifications if you do not have a viable model in place to stay in business.
E for effort
You can understand the Investment Management Association’s agenda for replacing the active, balanced and cautious managed sectors with the letters A, B, C and D.
Keen to avoid another arch-Cru-style embarrassment when the range was placed in the cautious managed sector, the trade body wants to absolve itself of any responsibility if a similar debacle occurs in the future.
What is less clear is how the consumer will benefit from this very strange proposal which will create less transparency and more confusion. Perhaps if the IMA review had included more than a tiny number of IFAs, a more sensible decision could have been reached.