We are in a post-Retail Distribution Review world, but what has changed? It depends who you talk to. As usual, there are different camps. In fact, to be precise there are three: leaders, strivers and laggards.
Whichever camp you fall into, and especially if you are a stiver or a laggard, learning valuable lessons from your peers could help you to improve the value offering for your clients, and keep on the right side of the regulator.
The leaders
This group have had a working business model for a long time – well before the introduction of RDR – and are doing very well, thank you. But what does “very well” look and feel like?
- They attract high-quality clients.
- They deliver great first meetings that open up the discussion skilfully and smoothly so the client can see that whatever they came in for is not the real issue; it’s bigger than that. By doing this well, they get all the clients’ business, not just the low-hanging fruit.
- They charge, and get paid, a premium price, because they deliver lifestyle outcomes for clients – they do not merely plug gaps with financial products.
- Work flows easily through the business as their structure, staffing, technology and business processes have been refined to within an inch of their lives.
- They make real profits after the owners get paid a market rate for their work in the business (a market rate being what they could get paid if they took a job with a competitor).
The strivers
This group thought they had a working business model but have found themselves still working hard to make the final tweaks that will move them into the leaders’ group. Firms in this space find that, once the final pieces of the puzzle come together, they experience a significant uptick in client quality without doing anything differently in their marketing – it is like magic. Somehow, better quality clients find them after they get their proposition and business processes right.
The laggards
This group, which is still a huge proportion of the industry, are bumbling along as before. They used to take ‘3 per cent plus 0.5 per cent’ as commission and now they do so as a fee. That has allowed them to stay in business, but it has not fundamentally addressed the defects within their approach (for example, poor profitability, poor staff, no systems and processes, poor client proposition).
