I Iread a story last year about microbes taken from a cliff face in the English fishing village of Beer surviving for 553 days on the outside of the International Space Station. The discovery had some scientists scratching their heads as it was the longest they had known a living organism to survive in such a hostile climate.
From the date of this edition of Money Marketing (June 30, 2011), there are 551 days to go until the retail distribution review comes into force on January 1, 2013.
It would not be an under – statement to say the next 551 days will be challenging for advisers. Many will need to change their business modelssignificantly, segment their client bases and attain professional qualifications in order to continue doing business after the RDR.
Like the FSA, I believe offplatform products and solutions will continue to be as important after the RDR as platform solutions.
One size and one approach will not fit everyone and there will still be a need for a transactional service for customers who have not accumulated
enough wealth to make a platform-based solution costeffective.
Some clients will be best served by platforms, some by packaged products and some by a combination.
Work is still going on to ensure the packaged world meets RDR requirements but already platforms are being seen as attractive options for advisers moving their business models because they are more closely aligned to the kind of market the RDR is aiming to deliver.
The overriding benefit of platforms for the adviser is that they have a data aggregator, which manages cashflow and communications for all client segments.
By looking at the three main aims of the RDR, we can see how platforms contribute to the delivery of the FSA’s objectives.
To address the potential for remuneration to distort consumer outcomes Platforms have a clear remuneration structure so customers can see what they are paying for at all times.
One approach will not fit everyone and there will still be a need for a transactional service for less wealthy customers
The only snagging point to be cleared up is on cash rebates. The FSA has struggled with this issue and is concerned that unlimited cash rebates from fund managers into platform cash accounts could undermine the transparency of adviser remuneration underpinning the RDR.
But cash rebates done transparently can benefit consumers and banning them does create big complexities for platform operators that will not necessarily benefit end customers.
We hope the FSA can agree a compromise, perhaps allowing cash rebates subject to some maximum level.
The other key is disclosure.
First, we need to make sure customers know they are paying for the advice. Then we need to avoid any bias, hidden charges or remuneration flows to any of the parties involved. These measures should help alleviate FSA concerns.
Improve the clarity with which firms describe and demonstrate their services to consumers An adviser can describe their services clearly for either platforms or packaged solutions. However, the transparency and technology functionality of platforms makes it easier for advisers to describe their services and allows customers to see what is happening with their investments and how much the adviser is being paid.
Transactions are clear and financial solutions are laid out in their component parts.
This enables the adviser to explain how each solution fits together to meet a customer’s individual requirements. The fact that outputs are stored for easy retrieval also aids clarity.
Raise professional standards for all investment advisers Professionalism is not a function of platform versus packaged. The RDR itself requires advisers to attain professional qualifications.
But if what a client needs is aligned with what a platform can offer, the overall advice service can be delivered in a more streamlined and professional way.
Platforms can help advisers by providing full visibility of a client’s holdings at all times. They offer the tools to deliver an integrated financial plan,
which enables advisers to excel at their jobs.
The best way to support intermediaries is to give them the choice between platform and packaged, so they can select which works best for
That is what the FSA expects of advisers and it is in our best interests to ensure they survive the next 531 days and arrive at January 1, 2013 in a position that will enable them to thrive.