When it comes to preparing for the retail distribution review, companies with a long track record of distributing exclusively via the IFA channel have almost as much at stake as adviser firms themselves. They certainly have a vested interest in doing all they can to facilitate the successful migration of advisers to the brave new world.
Aegon is a good example of this and this week I am going to look at some of the work the company is doing in preparation for 2013.
Recognising its common interests with advisers, the company is providing a significant level of support for adviser transition services, both with its field force, especially for strategic accounts, and its extensive web-based content over two significant sites.
The Business Brain self-service offering at http://adviser.aegon.co.uk/ business-brain/businessdevelopment/ index.htm focuses on business transformation content, covering areas such as customer segmentation and setting goals. Aegon was quick to point out that many other providers are charging advisers for much of the same content as they are providing for free via this service.
Its industry insight area at www.aegon.co.uk/aboutaegon/ industry-insights/ retail-distribution-review- RDR/index.htm provides extensive information around the detail of RDR timescales and small print.
I am told that both of the above are seen as work in progress and there will be considerably more content rolling out over the coming months. Product propositions director Dominic Holmes says the RDR is about advisers’ changing business model but the company sees pension reform as the big commercial opportunity for advisers.
The experience in Australia might suggest auto-enrolment will bring a decline in individual retirement savings but evidence from Holland, where Aegon has a wealth of knowledge, is very different.
After the Netherlands introduced both its RDR-equivalent and auto-enrolment, sales of individual savings products actually increased.
In the coming months, Aegon will be looking to demonstrate to advisers some of the techniques that contributed to this.
Aegon has not been without its share of challenges over the last few years and even without the RDR, it is in the middle of a transformation. Having identified its two core markets as at retirement and workplace savings, it is now in the process of building a platform and packaged solutions to support these areas.
I am told the forthcoming launch of Aegon’s platform will be as RDR-ready as it can be, although there are still some points that have to be clarified from Canary Wharf for the platform market as a whole.
The lead time is going to be longer in the packaged product market. The current product range already reflects much of the spirit of the RDR; the company introduced Financial Adviser Charge to a number of its retirement and investment products in 2008.
This allows adviser costs to be deducted straight from the product for both lump sum and regular contribution cases for up to the first 13 months of contributions. Aegon recognises these do not fully meet all the RDR requirements, for example, the present indemnity arrangement breaches the future prohibition on provider factoring.
The company currently estimates it will be rolling out its fully RDR-compliant product range from the third quarter next year. This will include personal pension, GPP, GSIP, drawdown, phased drawdown and offshore bond products and possibly an onshore bond, although it is still researching the demand for the latter after the RDR.
Given the current lack of clarity from the FSA on a range of issues, it is understandable that these products are not immediately available, although a Q3 launch next year leaves relatively little time for advisers to acquaint themselves with the new offerings, so it will be important for this roll-out to hit its target.
On the question of delivery of client and product information to advisers, Aegon recognises the pivotal role } of adviser client management and front-office technology and is committed to delivering increasingly deeper integrations, based around industry standard messages wherever possible.
I am pleased to hear this, given I have been on a soapbox about this issue for many years, although I feel it is important we make sure the systems and processes we have are able to embrace the rapidly evolving mobile communications device market, as they increasingly replace PCs.
The need for all organisations to review current processes to ensure they are future-proof is becoming more evident.
In addition, Aegon will be launching a webenabled personal pension product that will include front-office elements to support advisers.
The company cannot be drawn on timescale other than as outlined above, but this sounds like an exciting development.
It is exactly the sort of thing I expect to see more of from those providers looking to put in place innovative structures to service clients after the RDR.
I believe we are spending too much time as an industry looking at 2012 and not enough thinking about 2015. It is good to see Aegon’s horizons are longer than just 15 months.
On the subject of legacy products, there are a number of challenges. Ironically, the FSA ban on legacy commission would seem to have the potential to create significant consumer detriment where plans have important longterm benefits that are no longer available.
Alterations and increments to old S226 plans, for example, which may still benefit from generous guaranteed annuity rates or higher taxfree cash levels, may be difficult, if not impossible, to transact under the latest proposals. This is not just an issue for Aegon but for any insurer that still has such arrangements in force.
The FSA clearly would not intend to create such detriment; it is another unintended consequence. Perhaps there is an argument that if a client has paid into a contract for a given period, say, 10 years or more, they are reasonably happy with it and, as such, the contract should be exempt from the new rules.
Aegon’s candour in recognising there is still much to do, and addressing the short-term while not being fixated on it, is refreshing.
It obviously has to deliver on the above but issues are being addressed with realism and provided targets can be hit, it is a potentially innovative partner for the future.