Last year, when the RDR was being debated and evaluated, it seemed to provoke a range of fairly negative attitudes from scepticism and ridicule through to outright rejection. What has changed since then?
First, there has been a process of consultation and feedback which seems to have successfully engaged industry participants across the board. Encouraged by a seemingly more collaborative approach from the FSA, many corners of the industry have been submitting their views. The decision-makers, in turn, have been tweaking the proposals and seeking further feedback.
Second, many influential industry players appear to have accepted that certain intrinsic attitudes and practices are not going to be part of the future. These range from commission versus fees through to the qualifications required for advisers and the overall nature of independentand generic financial advice.
This shift was brought home to me recently when I attended a conference where the following happened:
l A life company speaker accepted that the old integrated life company model is dead. He said that unless companies using existing models are able to reinvent themselves, they will go out of business.
l A senior director of a major IFA firm explained how his firm has moved away from commission to fee-based structures. He extolled the ease of the transition and the positive results both in commercial terms and in client satisfaction surveys.
l A high-profile executive of an IFA network accepted that the proposed RDR changes are good news for clients, advisers and life companies. His thoughtful contribution was focused on how bestto make a transition from where we are now towhere we are going.
l A number of speakers acknowledged how they are reshaping their businesses by employing the treating customers fairly principle.
l The speaker representing Which? recognised the RDR as an important step forward in serving consumers better and accepted the need for advisers to help consumers take decisions about the future.
l Customer-agreed remuneration was an acceptedpart of all presentations.
I came away thinking that while there is a long way to go before the RDR becomes reality, it seems this is one piece of regulatory change which could turn out tobe hugely positive for the industry. The reason I feel optimistic relates to the fact that advice and the adviser seem to be at the heart of the proposed changes. This is not an attempt to regulate price or products but an initiative which could help harmonise the interests of all parties – advisers, clients, regulators and product manufacturers. If this can begin to create an environment of trust between all these parties, we will have experienced a great leap forward for the industry.
What are the obstacles which may prevent a positive outcome for the RDR? One of the key consequences will be the need for the industry to become more investment-centric in its approach. The days of the domination of with-profits are behind usbut the uninhibited growthof open-architecture solutions does not appear to provide the simplicity and transparency required to deliver a new regime fitto serve the entire market.
Advisers at all levels need support to deliver investment solutions that are fit for purpose in the new world. There are grounds for optimism on this front, as recent developments are buildinga framework of support on which advisers can offer highly credible propositions. I am thinking here of wrap and platforms, modelling and financial planning tools, risk-rated portfolios, multi-manager andmulti-asset solutions.
Robert Noach is director of financial institutions at Schroders