Up until this week the RDR could more accurately be described as a review of the advisory market. Excluding other aspects of how long-term savings products are distributed (or administered) created the potential for market distortion.
Broadening the review to include the non-advised sector has to be welcomed by the advisory market as it brings consistency with the adviser charging rules and reduces the potential for distortion. Improving transparency across platforms has always been something we are very supportive of, as we demonstrated last year when we revealed our fees. We didn’t necessarily agree that platform remuneration created bias but we are very comfortable with explicitly charging for our services.
Including platforms and execution-only businesses in this phase is logical, and brings consistency with the advisory market. Excluding life companies and Sipps does not make sense, as exactly the same charging mechanisms exist as in the platform space – and in fact most platforms run insurance and Sipps alongside other products. This needs to be addressed and, whatever the outcomes, there needs to be consistency of treatment.
The proposed changes to the execution-only market will shake up this side of the industry. We work with around 25 execution-only businesses, as well as run and manage our own Personal Investing business.
Explicit charging is not something a business should be afraid of. What we should see instead is a clearer differentiation between the charges for non-advice versus advice. This will help customers understand what they are paying for, and the value of the services they are receiving. It will help advisers too.
As Fidelity and as a platform we are well on the road to meeting these new requirements. The fact that these were so well signposted should not come as a surprise. We have already launched our unbundled pricing model, and expect this to be the main structure adopted going forward. Having to provide unit rebates rather than cash rebates is a nuisance rather than a material issue and, although it is an unnecessary complexity, we already process millions of unit rebate transactions today.
The crux of the issue is that our industry is now moving to a point where there is a fair value exchange. No longer will a customer receive a service from a provider which is remunerated by someone else. This will ensure that the value proposition is clear, well-understood and actively chosen by the customer. What will this mean for pricing? Well, price is only really an issue in the absence of value, so those businesses that are best meeting the needs of their customers will do well. It is only businesses which do not have a clear and well-articulated value proposition and do not meet the needs of their customers that have to fear today’s paper.
Ed Dymott, is head of business development at Fidelity Worldwide Investment