In just over 15 months from now our industry faces the most momentous changes in its history. The increased standards of professionalism that will be required are seen by most as a valuable step towards greater professionalism. But the transformation of the way that advisers are paid, with the prohibition of the tried and tested mechanism that has accounted for the vast majority of advisers’ income means these changes are more radical than the introduction of regulation itself nearly a quarter of a century ago.
At this crucial time, it is important for advisers to understand who can help them and how.
In a new regular column, I will be examining exactly what different financial product manufacturers, both life offices and platforms, are offering to assist advisers in these most radical of transitions.
Such support can come in countless ways. In the short term, it may address specific needs, such as examination and training support to help advisers achieve the necessary qualifications. However, this is only the tip of the iceberg. Firms need support in making the transition with their businesses, in putting in place new lower-cost ways of working and to help advisers develop, deliver and execute their new advice propositions.
Column by column, I will be exploring with individual companies what they have done already, the readiness of their products and their own internal systems to deliver information and services as well as what they are committing to deliver to advisers in advance of R-Day (January 1, 2013) that will support advice firms in the very different world in which they will be working from January 2013.
Some types of product manufacturers will have much more to do with their core product offerings than others. Some platforms will doubtless say their core proposition is already RDR-ready but it will be interesting to see what other support different platforms deliver.
Next year, it is expected that an unparalleled number of adviser firms will either be selecting core platform partners for the first time or reviewing their current selection. The information in these columns will seek to help inform advisers on what organisations are doing explicitly with the RDR in mind.
In most instances, life companies will have even more to do. Most will need to make significant changes to many of their products to be able to deliver the transparency the RDR requires.
Industry talk suggests that at least some insurers are planning a wide range of new RDR-friendly products designed to sweep away much of the complexity of the past. Yet how far have such organisations got in delivering these and when can they be expected?
When such new products do emerge, what resources will be available to advisers to help them communicate the benefits of newer, cleaner products to consumers and how will product providers and platforms help advisers reduce the cost of establishing and maintaining such products at a time when advisers’ income will most likely have reduced significantly?
Both life offices and platforms will need to make significant changes to their internal systems not only to meet their own obligations but also to support a whole range of additional activities and responsibilities that advisers will need to address. For example, much of the technology used to make commission payments to advisers is delivered using a technology that is effectively a dead language, if you like the IT equivalent of Latin.
The right decision will be to take the opportunity to replace these systems with new ones to meet the needs of the RDR but the time to build such systems is limited and as the FSA has still not delivered the policy statement following CP11/8 on adviser reporting, final specifications cannot be agreed until organisations know exactly what adviser needs will be.
Putting in new systems to address this will be crucial but any delays could be a major problem as no one wants to be in a situation where they cannot pay advisers their advisercharging deductions as the new system is not ready yet.
Similarly, significant changes need to be made to many policy administration systems to facilitate better servicing and support. In these columns, I will be looking to see exactly how individual organisations plan to deliver this.
One of the main purposes of these new columns is to provide objective insight for advisers as to which organisations are going to be best placed strategically to support them as business partners after the RDR.
This should help those firms that decide to remain independent in understanding who can help them operate most efficiently. In addition, it should help the increasing number of advisers who appear to be considering the restricted route in deciding who their best partners might be.
To support this process during 2012, we will be extending the e-Excellence ratings which F&TRC has delivered in association with Money Marketing to include measurement of how RDR-ready different organisations are in their preparation for January 2013.
These ratings will be continually revised and updated as organisations launch additional services with the updates appearing in the Adviser Evolution supplements, as well as those for e-Excellence and online. This process is not intended to stop in 2013 but will continue as an ongoing assessment of the extent that organisations will have delivered against the plans they will have set out previously.
The plan is to revisit each organisation on the anniversary of their last analysis to consider how much of what was planned is in place.
While there can now be a strong argument that the FSA’s failure to deliver a decision on platform rebates means that, by a strict definition, the big bang approach to RDR is guaranteed to fail, it is still going to be a mighty explosion.
With the delivery of a number of crucial documents and rules being pushed further and further back, it is becoming ever harder for organisations to prepare key support and services in time for RDR.
These columns will seek to identify those who are ready while at the same time highlighting areas where firms need to do more.