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State of denial

Denial is a funny old thing. As Mark Twain rightly pointed out, it is not just a river in Egypt. It is something that appears to be prevalent in retail financial services. Explore what denial means and it is little surprise.

Sigmund Freud postulated that denial is a defence mechanism in which a person is faced with a fact that is too uncomfortable to accept and rejects it instead, insisting that it is not true despite what might be overwhelming evidence. At least that is how Wikipedia defines it and I trust what Wikipedia has to say.

It would be easy to talk about denial and the retail distribution review but I am not going to do that. I have no doubt that a great many of my peers are continuing to deny the implementation of this regulatory review but I also get the impression that growing numbers are starting to accept it as fact before getting their house in order ahead of time.

Where denial remains an issue is the power of the internet. In fact, if you are still focused on the RDR, you are missing the bigger problem. You are certainly missing the bigger opportunity.

The internet has the potential to become a massive force of change in retail financial services within a relatively short space of time. This might not happen ahead of the end of 2012 but for those advisers paying the price of remaining in viable post-2012 businesses, it will become a reality very soon.

Consider some of these statistics from across the pond. Newspaper circulation is down by seven million in the past 25 years but in the last five years unique readers of online newspapers are up by 30 million. More video was uploaded to YouTube in the last two months than if the three biggest US television networks had been airing content continuously since 1948. Wikipedia features 13 million articles in more than 200 languages.

You might be thinking, so what? But then I am sure that is what newspaper publishers or TV networks were thinking before they experienced a dramatic fall in ad revenue and reader or viewer numbers. Is there really any reason to think that consumers of financial services will not do the same over the next few years?

Where does that leave the IFA who remains in denial about something, namely the RDR, which is going to happen within the next three years? For many IFAs who derive the bulk of their revenue from implementation of financial products, the likely combined impact of the RDR and the internet is going to be very uncomfortable.

For those not experiencing denial of denial, the solution to this looming “crisis-atunity” (thank you Homer Simpson for that creative use of the English language) is to get stuck in now. It might seem daunting and complex from the outside but once you start using Facebook, Twitter, LinkedIn and other related technologies it all falls into place pretty quickly.

Martin Bamford is managing director of Informed Choice

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Totally agree Martin. The RDR pales into insignificance compared to the threat/opportunity (I prefer to focus on the latter) presented by the Internet.

    One thing to which a solution will need to be worked out is the assumption by the internet generation that they can get a great deal of information for free. That’s why product selling doesn’t have value anymore. Anyone can find the cheapest life assurance contract these days. The value is in the guidance and expertise we have. We will have to come up with more ways to share it, and a great deal of what we know will have to be given for free, in order to generate trust with our potential audience. Twitter, Facebook, YouTube etc are the best way of having people get to know you online. My attempt at this is http://meaningfulmoney.tv

    I think the future’s very bright for those that grasp the nettle. But for all those who think that financial planning cannot be done online, there is a massive shock coming, which will make the RDR look like a minor inconvenience…

  2. I’m inclined to agree with Martin on this. I use linked in and have facebook, but never use the latter. Just can’t get in to this whole twitter thing.
    The advantage of the interenet and writing on blogs and sites like this (and I do a lot more than I should) is people see how you think (good or bad) and then can make a choice about whether they like your style (or not).
    I’ll probably look to start taking on new clients again from about September onwards, so from that perspective and IT/web presence and marketing review will make sense to ensure we target the business we WANT and not what wants us.
    One of the reasons we got rid of our visible office presence is we simply did not want walk in trade as it is more hassle than it is worth compared to referrals or someone who already feels they know you based on what you have said or written.
    As to the RDR, it’s as much an opportunity as a threat for those of an age where it makes it worthwhile staying. For some it is the threat which means it is time to go, but sadly many will be missed by their clients and will not find an adviser they trust for sometime to replace them, which is why I bang on about the RDR timeline being the problem and NOT the RDR itself.

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