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Trials on transition trail

Few issues can be more important to firms which have operated on a commission basis than how to effectively make the transition to fee-based advice in accordance with adviser-charging.

Most firms which have made the change will suggest it is usually a three to five-year process and one that results in some mistakes being made and lessons learned along the way.

With less than 18 months until commission is outlawed for investment business, any organisation that is not already well on the way to making the transition is likely to face some tough challenges.

I was recently shown a new service that very effectively brings together much of the key information necessary to manage the transition and make it easy to monitor converting a business from being based substantially on initial commission to ongoing adviser charges.

With so many firms needing to make this transition swiftly, the accumulated level of industry knowledge on what works and what does not as part of the migration process must be huge.

There does seem to be a disturbing level of evidence that significant numbers of adviser firms are taking the approach that they will worry about such issues when we get to January 2013. This is not a sound strategy, not least because the FSA has stated that it is conducting an exercise to identify what progress firms have made and will not look kindly at those firms if the answer is “none”.

I would urge any firms currently wrestling with this challenge to find the time to look at the proposition explored below.

The service is extremely clever in that it is positioned at the intersection where client management systems and platforms come together in the advice process, fulfilling the need to service both new and legacy assets consistently while at the same time addressing remuneration management.

The service was launched in June by True Potential as a “business transition” module to allow advisers to identify in detail the source and type of their current revenue streams, how much comes from provider commission, both initial and ongoing, and how much by agreed adviser charges.

This is then broken down to show how much is being serviced via traditional life and pension providers and other platforms and how much has been converted to the True Potential platform which is operated with SEI.

Using a series of simple screens, the adviser can monitor in seconds, using just a handful of mouse clicks, the progress they have made towards moving to an RDR-ready business and the extent of existing client assets they have currently placed with other providers that might be converted.

At 40bps, this may not be the cheapest platform but the range of related services and flexibility that are built into the overall True Potential proposition make for a very compelling consumer proposition, one which can certainly support changes to the ways in which an adviser might restructure their propositions to achieve better consumer outcomes.

The way in which True Potential has put this together raises some really fascinating questions for other platforms, technology suppliers and networks/support groups – how can you deliver a solution that addresses so many adviser needs? This certainly shows what Standard Life could achieve with Focus if it was minded to, which could be good news for any threesixty members.

We undoubtedly need more innovation in the market and many of the historic solutions have not evolved at the speed that might be needed.

If you started with a clean sheet of paper to build a new solution to meet the needs of advisers facing the RDR transition, the ideal answer would probably not look too different from what True Potential has delivered.

At the time of writing, it is being reported that Sesame has decided to roll out a new system to its members from Redland Business Systems.

Opting at this stage of the move to RDR to adopt a system that is new to the market is a brave decision but I can see some arguments why this might be the right course of action for Sesame.

From comments on the way in which it is planned to bring together the Sesame One platform, launched last year in conjunction with Axa Elevate, there would appear to be significant consistency with the True Potential approach and it has to be said that it is not a bad blueprint to work to.

I am look forward to hearing Sesame’s logic and having the opportunity to put its new system through its paces and in time produce some detailed benchmarking via our adviser software ratings, with the next iteration due to be published in a Money Marketing supplement in February 2012.

The systems that advisers will need to run their businesses profitably after the RDR need to be considerably more advanced than much of the adviser software provided previously.

Some firms are delivering such solutions now and True Potential certainly fits the bill, as potentially could Focus if Standard Life chooses to lead it in that direction.

Obviously, I will reserve judgement on the Sesame solution until I have had a chance to understand the detail. The above are not the only solutions making serious progress in the market but they are certainly among the contenders that should be on anyone’s short list, especially where adapting to the needs of the RDR is a priority.

Ian McKenna is director of the Finance & Technology Research Centre

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