When the RDR was first created in 2006, its implementation seemed a lifetime away but the deadline of the end of December 2012 is racing ever closer.
All stakeholders have had sufficient time to digest the implications of the RDR and what it means in terms of the way they go about the advisory process, how they charge for it and the qualifications they need to keep on advising. As far as I can see, the equity-release sector is set to be a net beneficiary of the programme but it will also be presented with a number of challenges.
Given that once the RDR is here, advisers will be paid solely for the advice they give rather than a combination of this guidance with product selection and fulfilment, this formal de-linking of advice from product should hopefully see introducers become more inclusive in terms of fully considering all the options available to their clients.
Whereas the temptation in the past may have been to stick to what they knew or areas they had existing expertise in, the new edicts should go some way towards demystifying the suitability of equity release. While any enhancement in the profile of equity release will be welcomed by the sector, my only concern is that advisers migrating into the sector as a result of the RDR gain the necessary level of professional competency in order to effectively meet customer needs.
We have all heard the stories from various sectors within financial services about the potential dangers of advisers adopting a part-time attitude to ancillary products and services by dipping their toes in the water and this is certainly the case when it comes to equity release.
The sector has a unique advice process, product suite and sales cycle and it can’t be expected that advisers can simply handle cases in the way they do other financial services.
The target customers themselves are a completely separate demographic to what many advisers will be used to dealing with and that presents its own set of challenges that necessitates a different approach. Although RDR may “force” advisers to get up to speed with such previously unfamiliar areas, some may feel that subsequent business levels do not warrant investing in developing their professional competence to this extent. Nevertheless, a middle ground does exist for advisers who find themselves in such a situation.
Forming strategic alliances with specialist firms may not only be the best solution for such advisers in terms of financial viability and risk management but it also allows customers to benefit from a more tailored experience and the highest standards of professional practice.
You only have to see how areas such as the mortgage market have benefited from regulation in 2004 to see how far the advice process has come and how far we can still take financial service provision.
The clearer consumers are about the service they receive, how it is paid for and the people they receive it from, the better it is for everyone involved.
Peter Welch is head of sales & distribution at Bridgewater Equity Release