From Special Report: RDR Software - June 2012
By making the most of back office systems the adjustment to RDR can become much more straightforward
With the deadline for the retail distribution review now less than six months away, the vast majority of advisers still have some way to go to meet the regulatory requirements to be ready and able to work in a post-RDR world.
Not only is it vital for advisers to be fully compliant and up to speed with the FSA requirements, it is also crucial advisers have the right tools and supporting technology in place to enable them to operate after 31 December 2012.
The preparation required should not be underestimated and many advisers are doubtless daunted by the task ahead.
The secret is to break RDR readiness down into bite-size pieces so you have the clarity to satisfy critical requirements and forge your course for the future. You are by no means alone in this with plenty of support materials available online to guide you through key areas of focus. To get you started, we have identified the crucial milestones on the path to RDR.
The starting point has to be assessing exactly what the task ahead means for your business. Make sure you fully understand the RDR changes that will take effect from 1 January 2013 before assessing your current level of readiness. An audit will help identify any gaps or shortfalls and kick-start your planning.
At this stage you will need to address some fundamental questions about how RDR is likely to shape your proposition. This should begin with deciding whether you will offer independent or restricted advice, or a combination of both.
Next, you need to get a clear understanding of how your business is currently run and, ergo, the effect that RDR will have on it. If you assess and monitor output against income, you can get a better idea of what needs to be done to remain profitable post-RDR.
This sounds complex but you should at least try to get an idea of the fixed costs of running your business, particularly if this is something that you have not done before.
Technology can be really helpful in this particular area. Make the most of your back office system; logging information, maintaining data and reporting on all client activity can be streamlined and make the adjustment to RDR much more straightforward.
After analysing the inner workings of your business you are well placed to begin segmenting your client base.
RDR is going to fundamentally change the way that advice is offered, and for many advisers, change the way in which their business functions on a day to day basis.
You will need to evaluate and rate each client to your own set criteria before grouping them into clearly defined segments. It can be done in a variety of ways, not just by the amount of funds under management, but also on how much each client costs to service. This will help you determine the fee structure and charges you would need to introduce if you were to continue to serve them to the same level post-RDR and establish whether you have any clients who are no longer profitable or core to your business.