RDR: The final countdown begins
Advisers and back offices must work together to ‘RDR proof’ their clients
We’re all guilty of ‘homogenising’ financial advisers from time to time when discussing the RDR’s impact.
However, the diversity of experience and reaction is as pronounced as you would get with any group of individuals. If you ask 100 adviser firms how prepared they are for RDR, you get 100 different answers. Every firm is at a different point on their journey to RDR transition. Some have been RDR ready for years. At the other end, some will have a lot of work to do in a very short space of time. Between these two extremes you can expect myriad permutations.
That said, advisers firms in all their shapes and sizes – and here I should declare more than a passing interest as I used to be an adviser – have proved that as individuals and business owners they are both adaptable and tenacious.
So I can say with confidence that those advisers who want to stay in the market post-2012 will do so and will prosper in the long term. For a few the first half of next year undoubtedly has the potential to be pretty hard due to delayed preparation for the RDR. What will be a key determiner of how quickly that hardship eases, dissipates or disappears is getting to grips with what service propositions are appropriate as well as economically viable for different groups of clients.
Creating an ongoing service that clients will happily pay for at the same time as being sustainable for the adviser firm is the holy grail.
Clients will invariably want different service elements at different levels of cost. Many firms are finding that the most appropriate solution for the post-RDR world is client segmentation. This is evident from our research, which revealed that 55 per cent of the 600-plus advisers we asked had already segmented their clients into different groups with different needs. A further 26 per cent were on track to complete their segmentation by the end of the year. The final percentage (19 per cent) intended to segment their clients on a case by case basis through 2013.
While many advisers have a clear view of how they plan to structure their businesses, it can help to examine how others are tackling this issue of segmenting their books, in order to make sure that all areas are covered. So here’s a rough guide to segmentation.
First up is determining how many different propositions will be required to address your clients’ varying needs, without creating complexity or unnecessary additional work for you and your firm. For example, propositions could range from a no-frills, non-advised service for clients who simply want to set up an Isa each year, right through to a premium, full-advised service with regular face-to-face contact to meet the more sophisticated financial planning needs of clients who want to pay for a high level of ongoing support. Although this will take slightly longer to implement, it can be worthwhile in the long term to involve both advisory and back office teams to devise each service.