Ernst & Young has warned providers are adopting “highly risky” RDR implementation strategies without appropriate back-up plans in the event the deadline is missed.
In its One Step Beyond report, which looks at the future of long-term savings and investments, E&Y says it has seen examples of where providers are not doing enough to track their progress to RDR readiness.
These include providers working to a deadline of 31 December for key implementation tasks, with no milestones set to measure progress ahead of that date. E&Y has also seen providers failing to keep risk logs of what could go wrong, and lack contingency plans if regulatory requirements are not met on time, such as where companies are relying on third party software providers.
It has also noted providers are not keeping records of why strategic decisions have been taken, such as reasons behind a provider’s approach to facilitating adviser charges.
The report says: “In our view, leaving critical implementation tasks to the ultimate deadline is highly risky, and insurers should be planning for an earlier RDR readiness date, with explicit contingency plans in the event of slippage.”
E&Y says facilitating adviser charging is “causing headaches” for some providers who are looking to offer sufficiently flexible adviser charging methods, and says providers need to strike a balance between getting evidence that the customer has agreed to adviser charges without adding extra complexity to the sales process.
The company notes the challenges faced by providers to facilitate adviser charging for new business while continuing to pay trail commission on pre-RDR business. It also highlights that providers have not given enough thought to post-RDR monitoring, including areas such as decency limits on adviser charging.
E&Y points to the Dear CEO letter sent to firms earlier this month about payments that work around the RDR commission ban, and says the letter suggests that in the race to buy up distribution firms may be breaching regulatory rules.
The report says: “In the heat of the battle to secure deals and relationships, there is a risk that providers and advisers may have overstepped the mark, or that certain compliance details may have been overlooked.
“Senior management and non-executive directors should satisfy themselves that any deals done are both commercially advantageous and compliant. Failure to ensure the latter could undermine the former.”