Few business owners can be unaware of the requirements and risks presented by the RDR. However, the same is not necessarily true of every adviser. Business owners face a significant challenge in ensuring that they bring their best advisers with them. A business is only likely to transition at the pace of the slowest adviser.
The trouble is that the majority of advisory businesses are not set up with the traditional employee/employer relationship that would facilitate this. Advisers have tended to operate as individual fiefdoms within advisory practices. The business manager has to sell them on a collaborative approach and possibly change their remuneration structure. There are a number of ways to approach this. Most consultants suggest that an effective way to deal with business change is to demonstrate consistently to staff “what’s in it for them”. This can be carrot or stick, depending on the individuals involved and the style to which they best respond.
But there will be those who cannot change. This raises the spectre of the “toxic” RI, as discussed by our panel in the second half of the Money Marketing Academy this week. This RI drags his heels on transition, creating a significant liability for the business owner. He then moves to a compliant business post-RDR and operates in the same product-selling way he has always done and creates a liability for that business as well.
Most of our panellists recommend the speedy cull of this type of adviser. They present a disproportionate risk to the business and are unlikely ever to adapt to the new model. For those inclined to give the recalcitrant adviser one last chance, our agony uncle Roderic recommends creating two clear business structures within the same firm – pre-RDR and post-RDR structures and making it a business objective for advisers to commit to one side.
The reluctant business owner is less common but there are business owners who do not have a post-2012 strategy.
Advisers within those firms need to protect their own careers. There are plenty of businesses which would welcome a forward-thinking RI, particularly those that have just seen a cull of their “toxic RIs”.
Advisers – whether business owners or not – need to ensure that everyone in their practice is moving in the same direction. They cannot risk their own business or future career on a reluctant colleague who prefers the status quo.