Brave new world
Platforms have already unveiled their post-RDR propositions but life companies are dragging their feet
Until recently the practical implications of the retail distribution review for products seemed far off. The impact on the things that we all work with every day, the investments that are the end product of the advice process just was not clear.
All that has changed recently. Providers have started to come clean about what their post-RDR propositions will look like. It makes for fascinating reading.
On the plus side, the shiny, new part of the product market is largely in good shape. Some nips and tucks here and there, but nothing that smart people with access to unlimited coffee and pizza would struggle with.
One step back is the bundled platforms. Both Cofunds and Fidelity have made announcements as to what their post-RDR proposition will be. Skandia has been stung into some pronouncements, but its charging remains a closely-shrouded secret. These platforms host more than £100bn of mainly adviser-controlled client assets and it is right that they should be giving advisers confidence in what their propositions will look like in a few short months’ time.
Skulking along behind are the life companies. Many of these have proudly trumpeted their new propositions, but the question of what happens to the legacy book is a thornier issue. Why have they been so recalcitrant?
Many lifecos have proudly trumpeted their new propositions, but the question of what happens to the legacy book is a thornier issue
The answer lies in something pretty prosaic – technology. The systems these products are built on are a work of art. They exist to host complex structures for millions or tens of millions of policies at a time. They are amazing at doing the same thing over and over again without breaking, but, compared to modern systems, they are hopelessly inflexible. That does not make them bad, once they were state of the art but times have changed. A test like this was always going to come, when all the rules change, all at once.
The upshot of all this is that the older products are unlikely to get a wholesale wash and brush up for RDR. Anything the slightest bit unloved is likely to feel even more rejected on 1 January next year. The driver for this is simply cost. Just lifting the bonnet on each policy series can cost millions.
Some providers have – bravely I think – started to step forward and tell the market what their plans are. In the vanguard is Standard Life, which published in May and, crucially, told advisers when they could expect more detail on the missing parts. I do not believe any insurers have done that well in the run-up to RDR. They have all been too busy running around offering half-a-loaf ‘business consultancy’ in the hope of gaining competitive advantage (and why an IFA would listen to a broker consultant is beyond me) – but Standard have done a decent job here.