Are you ready for RDR?
We now have less than four months to go until the retail distribution review is implemented, and it is clear - even by reading this week’s Financial Adviser, that some are more prepared for the changes than others.
We heard that advisers were still waiting for information on how several big name providers would facilitate adviser charging post-January 2013, and the subject of charging, and ensuring an adviser’s business plan can stand up to the rigours of the new regime, is an increasingly pressing concern.
Qualifications have rightly been at the top of the agenda as the pre-RDR clock ticks on, but even the most highly qualified advisers will still need to adopt a robust strategy for their own business, which takes rising regulatory costs and the transition to a charging model into consideration.
Almary Green, a medium sized IFA firm based in East Anglia said they had been stung by a 60 per cent increase in FSA bills and FSCS levies, which had essentially curbed their ambitions for expansion and recruitment.
But in addition to these well documented regulatory challenges, the transition to a charging model and how a firm implements the changes could have a devastating effect on many advisory firms, especially if they have not started planning ahead.
Kim Barrett of Hertfordshire-based Barretts Financial Solutions said it took him and his son more than four years, and many colourful discussions with his clients, to make the transition to a charging model, and that anyone who thought they could start working on the changes this late in the game “should forget it”, as it was too late.
We do not know how many advisers are ready for the changes - I have spoken to many who are all set and some who say they have a lot of work to do and a lot of clients to consult about the changes in the way they pay for advice.
There is also an argument that the general public need to be educated much more about the RDR, and the danger is that many advisory firms will throw in the towel, adding to the already common assertion that clients at the lower end of the pay scale will miss out on advice.
Mr Barrett said he predicted that 80 per cent of the IFA industry would move on to different roles post-RDR - and that was in 2008.
His thoughts have been echoed this week by Ronan Kearney, director of IFA firm Allium Capital and restricted advisory and investment firm Caerus.
He said the amount of IFAs in business could drop to one-tenth of its current strength within the next five years. With advisers realising that their business model can not sustain the rigours of being a whole-of-market independent firm.
It is clear that 1 January will not be the end of the story, there are still many unanswered questions, and the industry (or profession), will look very different in 12 months time.