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The RDR fitness plan

I had an interesting chat with an adviser last week and something he said struck me. As we discussed his retail distribution business transition plan, he pointed out that those who delay in implementing their RDR vision only have 20 monthly pay days until the regulation takes effect on January 1, 2013.

Thinking of your own RDR transition, what will you do in those 20 months? Will you embrace change or have you yet to start your journey?

We all need to consider what our businesses will look like in this challenging landscape and to identify the needs of our clients. Once we achieve this, we must try and meet these needs in a manner that delivers business profitability and a mutual and ongoing benefit for both the adviser and the client.

You may have heard the views of many experts on what is an RDR-ready business. However, the time for taking stock is nearing an end. Action is now essential if you want to ensure you can implement a profitable and fulfilling business model under the RDR.

The problem for many advisers is that although they desire change, many do not have the tools or support available to enable this. Theory is all well and good but it is no substitute for rolling up your sleeves and working out your future business model and now practical help is at hand.

Through the work Aegon has been doing to develop its business transition website businessbrain, it has identified five key steps in the transition to RDR:

1. Decide what your business will look like after the RDR

In thinking about what business structure you can develop, the starting point has to be clarity about what you do now, who you do it with, who helps you and what you get in return for the effort you put in and the services you provide.
Write this down, avoid the jargon and then give it the vision test:

  • Does it seem real?
  • Does it motivate you?
  • Will it enthuse new and existing clients?
  • Is it achievable at an ongoing profit?

If it fails any of these criteria, start again.

2. Segment your client bank to identify profit and longterm value

Academics define customer segmentation as the practice of dividing a customer base into groups of individuals that are similar in terms of age, gender, interests, spending habits and so on. Using segmentation allows companies to target groups and allocate business resources most effectively.

I prefer to avoid academic definitions and look at customer segmentation as the best way of identifying the clients who can provide you with most profit in future. It can also help you identify the clients that are costing you time and money.

You can then ensure you design a proposition that offers sustainable long-term value for both your business and your clients.

3. Design your RDR client proposition

Your customer proposition is what you say you will do for your current and potential clients. As you transition your business, it is sensible to ask yourself the following questions:

  • Do you have a client experience?
  • Will clients pay a fee or a retainer for this?
  • Is it of real value to you and the client now and in the future?

If the answer to any of these questions is no, you need to develop a profitable proposition that delivers real long-term value to your customers.

With the right customer proposition, you can create relationships with loyal customers and make yourself RDR-fit at the same time.

4. Work out your remuneration options after the RDR?

You have to decide on the correct customer proposition for each of your customer segments and then select the most appropriate remun-eration methods for the service you will provide. Whichever method you choose, always make sure it is profitable. Aegon looks in depth at:

  • adviser charging;
  • consultancy charging;
  • trail commission;
  • retainers;
  • fees; and
  • protection issues.

Just as important as deciding on your remun-eration options are the processes you must put in place.

5. Make an RDR action plan

Your action plan should not be a one-off event but should become part of your business DNA and a natural element of your day-to-day activity.


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