Now that the pieces of the RDR jigsaw are beginning to fall into place and the final picture is being revealed, all businesses, of whatever type, should nowbe devoting time to understanding how they expect the changes to impact them. This is true for all businesses, large or small.
It holds true even if you think that your response will be to exit the industry. There are a whole host of questions and issues to consider. How do you value an IFA business in the current environment? How do you build value and make yourself attractive for acquisition, especially in a ‘buyers market’? It is certainly more than a case of simply building a book of trail! In a market where many of the firms that remain will be looking to find profitable customers and build valued relationships, any trail book that doesn’t come with such attributes could be a fast depreciating asset. Further, if you’re looking to sell your business as a going concern, how are you making sure that your processes, technology and culture are compatible, or at the very least cost effective to migrate?
For those choosing to remain in the market the challenges are at least as difficult. Whilst I wouldn’t wish to belittle the issues faced by firms
and advisers in meeting the new qualification requirements, it is clear that most who intend to carry on in the industry have already begun the journey to higher qualifications. In fact, many are realising that in the tough new competitive environment, there is real value in going beyond the minimum.
For me, the more interesting and market changing challenges are posed by adviser charging, which will change the existing relationships between all the players in the industry, most important of which will be the one between the customer and their adviser.
Advice businesses need to start considering now what their business model will be and how they are going to persuade their customers to pay for their services explicitly. This requires a host of questions to be answered. Do you know the [potential] value of each customer in your customer base? How strong are your existing customer relationships really? What will your service proposition[ s] be? Where is the real value in your service to the customer and how do you effectively communicate this? Are you managing your cost base so you can deliver your proposition at a cost the customer is prepared to pay, whilst still making a profit? How will you collect your charges?
I think the ‘articulation’ of the value of your service will be a real challenge for many in the industry. Clients are busy people too and will not be aware of the ‘behind the scenes’ work you do for them. Equally, some clients hugely value particular stages of the advisory cycle, and don’t value other areas. The chart below shows the results of some interesting research mapping adviser time against perceived value by the client.
These are big questions at the best of times and doubly so in the current economic environment. Once you answer these you then need to tackle the whole issue of implementation. ‘Big-bang’, or, take your customers with you on the journey? Another reason to start planning now. Even if you think you and your business can change quickly, will your customers?
By the time you read thiswe’ll be only two months away from the final rules being pub- Danny Wynn RDR and Commercial Director Legal & General lished and COBS being amended. Probably, too late for any real change to the proposals before the next election and any potential change in Government. Besides, how many people really believe that it will be a priority for a new Government to undo the RDR, and have the inevitable battles with the consumer lobby whilst they are at it?
So, whether you love it or hate it, it is now time to devote our energies to finding innovative ways of making the RDR work and being successful, rather than resisting what is now inevitable change. After all, do you really want to be playing catch-up in a tough new market?
Over the next few editions I will be sharing some of our thoughts on a few of these specific issues, such as how to value a business, creating
and articulating a proposition, and implementing change. At Legal & General we understand the importance and impact of these changes on your business which is why we have invested considerable effort in developing Business Solutions support material and training our Wealth Development Managers to be able to have these fundamental business planning conversations with you.
To find out more about Business Solutions, please visit www.legalandgeneral.com/advisercentre