Managers need RDR disaster plan

With their distribution partners facing such trauma, fund managers need their own disaster plan for the RDR.

If not quite the worst scenario, a poor scenario could see many advisers knocked out of giving advice on investments and pensions.

We know the two ways that this could happen. The first sees many advisers failing to obtain enough exams to get to level four. The second sees their firms failing to cut it in terms of adviser charging, or even changing strategy to focus on protection and mortgages.

There is so much noise around this issue that it is very difficult to make firm predictions. But some of the numbers are already concrete. RS Consulting, working for the regulator, estimates that the population of directly authorised advisers fell from 17,132 to 15,132 in 2011 and the overall drop in adviser numbers was 7.9 per cent.

In a much overlooked survey just before Christmas, Workload suggested 57.5 per cent of firms did not have an IFA qualified to QCF level four. The sample was significant at 4,300 firms. On its criteria – that 75 per cent of income should be derived from fees – nine out of 10 firms did not meet Workload’s ‘RDR ready’ status.

While I know one man’s fee is another man’s adviser charge, and Workload’s bar for being ready is high, it should still give huge cause for concern.

While nothing concentrates the mind like a deadline, we could witness a very big fall in numbers in the next 12 to 18 months.

Does that mean we will see a big change in fund manager behaviour as they seek investors and investment from elsewhere? To answer that question, we need to consider what happened in ‘happier’ times. After all, devising a strategy for attracting and retaining funds under management used to be relatively straightforward.

In the mid 2000s, with the dot-com bust giving way to relatively benign stock markets, managers faced a pretty settled system of distribution. IFAs ruled the roost, and the asset gathering power of off-the-page newspaper advertising and annual Isa guides remained very significant, albeit diminished by regulatory scrutiny.

For a launch, the key people to convince might change over time, but the type of people – the multimanagers, the bigger discount brokers and the better investment advisers – did not.

To build a broader base, particularly if you were prepared to sacrifice sufficient margin, you would make sure your funds were on the right shelf at the fund supermarkets and offered as fund links by the big life offices. At the front end of these deals, commission was obviously a big driver.