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Simon Collins: Ethical case study


You are a director of an intermediary firm primarily dealing in investment business.The firm considers it is as well prepared as it can be for the RDR and is now considering the marketing it will be conducting and the products it will be offering in 2013.

In the past, the firm has relied heavily on marketing to increase business on a year on year basis from both new and existing clients. As part of the marketing proposition your firm has specifically tailored products and services. How should the firm now approach this and are there any additional requirements or issues that the firm needs to consider in a post-RDR world?


When thinking about marketing and designing products and services to meet customer needs, a good starting point is to consider the six intended outcomes of treating customer fairly. Two to consider are outcomes two and five:

  • Outcome two states that the products and services marketed and sold in the retail market must be designed to meet the needs of identified consumer groups and targeted accordingly
  • Outcome five states that such products and services should perform as firms have led clients to expect and that the associated service must be of an acceptable standard.

When considering new products and marketing campaigns, you should first establish your client profile, both existing and prospective, determine what services or products are most appropriate to them.

You need to know sufficient detail about your clients or target market. For existing clients, you may already have analysed your existing database as part of the pre RDR preparation work. Ideally, the database should allow you to break down the client population into specific groups, for example, based on age, net worth, income level or life stage.

Most of this information should come from up to date ‘know your client information’, both hard and soft facts, with the soft facts being particularly relevant when it comes to promoting services and products based on life stages and aspirations.

Clearly identifying the profile of your existing client bank should allow you to also determine the new client market which you would wish to target.

Once the target market has been identified, work can commence on the product selection or design and the method of marketing this determined.

It is always a good idea to keep the compliance department closely involved throughout this process as there is less likelihood of the marketing department developing a near final product or marketing plan only to have to make significant amendments to this to meet regulatory requirements. Bear in mind also that some of these requirements may be new as a result of the RDR.

Charging is an issue that will now need to be addressed, not only as to the amount to be charged but also how and when to disclose this. Charges need to be fair to clients as well as being commercially viable to the company.

Where the offering is a service, the charge is usually an hourly rate or a set percentage of the sums involved. Where the offering is a product, this has often been a product-related amount, being a variable percentage dependent on the investment or premium involved.

There may, however, be some interesting issues arising from this. For example, where an existing client, with whom you have an agreement to provide ongoing advice for which you charge a fee based on funds under management may wish to switch funds into the new product, then it is unlikely that the agreement will permit you to levy a ‘product charge’ in addition. Levying any such an additional charge in these circumstances is unlikely to be seen as treating the customer fairly.

Simon Collins is managing director of Resources Compliance


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