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The RDR and Custer’s last stand

For those of you who have taken the time to read through Kevin’s piece, I think what comes out of this clearly is the picture of a firm which not only decided that action is needed but has started to put it in place. I am not particularly keen on the Christmas approach to project timing, that is that RDR is only 28 months away but, nonetheless, Kevin’s point does provide a form of wake-up call to those individuals who believe the RDR is something in the dim and distant future. Irrespective of the various machinations of the FSA and the various style changes and tweaks to the RDR’s final proposal, it is quite clear that the one thing that is not changing is that it is taking place on December 31, 2012.

Roderic and I were involved in some roadshows earlier this year and at one a lady asked me whether a change in government would have an effect on the implementation of the RDR. In other words, are the Tories the equivalent of additional troops for General Custer at the proverbial last stand? I explained to her at the time that the change in political hue was really largely irrelevant and in any event the RDR is, in our opinion, merely a catalyst. It is absolutely essential that firms change and become more robust businesses. We have watched with horror the escalation in costs in contributions to the FSCS. That is not something that is going to slow down and therefore the more robust businesses become, the better it is for them in the long term. That is not to excuse the way the FSCS is actually run but that is a topic for another column in an entirely separate part of Money Marketing.

If you are a principle, for goodness sake do not do this alone. You will need the input of your back office team

If you do nothing else this weekend, I would suggest you take Kevin’s headings and start to write your own content underneath. You need to determine precisely the market in which you want to operate. You need to determine how you are going to charge and, just as importantly, you
need to determine what you are going to charge for. If you are going to make these charges, you have got to make sure that you deliver quality
service and for that you need process. You only have to look at some of the final determinations issued by the FSA and indeed in the more recent one on the use of wrap platforms to note that it is absolutely essential that your process is not only in place but is fully documented.

So take the time now to look through how you do things and set out the processes you use. If you are a principal, for goodness sake do not do
this alone. You will need the input of your backoffice team. After all, unless you are operating the firm single-handed, you probably are not going to know exactly what happens at every stage in the process. So start it off, get it moving but at the end of the day recognise that someone else will probably be the best person to edit the processes that are offered. In my own firm, we are currently road-testing some process engineering software and as and when we have deployed it successfully in our business over the next few weeks I will be writing about it in Adviser Evolution in a separate piece.

But back to Kevin. He is quite clear that whether he was proposing to sell his business or whether he was proposing to continue to develop his business, change is needed in either circumstance. It is just not possible to negotiate the sale of your business at a price that you will find
acceptable unless you are actually in a position to show that your firm is ready, willing and moving forward. It is important to underpin what you are doing in the way of charges by the qualifications of the individuals. That is why level four is simply a staging post. In the long term, we have to recognise that the regulator wants to go to level six.

It is quite clear to me that multipliers for the purchase of a business will continue to fall, particularly where businesses show no sign of being
RDR ready. I believe they will fall to the extent that those individuals who show no commitment to change their business and have done nothing
at all towards improving their level of tested competence to level four will find that what they have on December 31, 2012 is a shell and not a business. That is something we all need to avoid and Kevin’s diary is a very good place to start if you want to avoid that outcome.



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