The transition to the new regime begins in January 2013. Foremost in advisers’ minds will be the need to protect their revenue streams in the face of a new fee model, a challenging investment market, and a jumpy client base.
It is adapt or die, and advisers can’t be expected to survive the biggest shake up of the financial advice landscape in living memory alone, which is why the continued and expanded support of investment providers is absolutely key.
A different kind of support
The key question now for advisers is what to ask for from their providers to help them remain profitable and successful in the new environment beyond the more straightforward issue of compliance. Most investment providers have been helping IFAs plan for the post-RDR era for some time, so dedicated RDR compliance guidance is now plentiful.
Beyond help with regulatory compliance, the most obvious way providers can support advisers is to offer a strong range of RDR-ready products backed by effective sales and marketing collateral.
In practice the retail investment market is an increasingly level playing field in this respect. Moreover, what will change most post-RDR won’t be the products per se, but the way advisers sell them.
That is why the most effective support a provider can give advisers over the next 12 months, certainly in terms of competitive advantage, is a different kind of support – business support.
Insight beyond finance
It is in cross-business functions like marketing, customer relationship management and e-commerce that providers can make the biggest contribution to advisers, especially during the post-RDR transition period.
Advisers should look to providers that can offer support in these areas as they begin to redefine their business models. These functions will become increasingly important as commission-led sales come to an end.
Client targeting is one good example. The new two-stream fee advice model incentivises IFAs to manage their time much more carefully.
A facilitated advice product such as an Isa might not offer much in the way of a fee, so an adviser is best offering a succinct, near-automated service to make margin.
And while a fee-based IHT plan might involve time-consuming research and a series of face-to-face consultations, the fee earned will be relatively high.
The most successful advisers, therefore, will be those who spend their time most profitably and this is where providers are in a unique position to help.
Leading providers routinely apply audience segmentation techniques in the course of their marketing and product development programmes. They work with partners who are experts in customer profiling, data analysis and back office systems.
By sharing this knowledge, providers can help advisers maximise their time-spent to fee-earned ratios by targeting the right people at the right time with the right message.
An example of a provider offering support to the adviser market was a support campaign offered by a leading investment provider that focused specifically on helping advisers analyse their proprietary client data to identify people who had untapped earning power in their portfolios.
For advisers who signed up to the idea, it was an easy way to unlock new revenue from their existing client base and we had strong feedback from the channel that this is welcome and valuable support.
Time to think big
Targeting, of course, is just one example. Providers employ any number of experts working in specialist fields within and beyond finance. By passing on institutional and third-party knowledge in the form of support collateral, practical tools and adviser workshops, providers can help IFAs with everything from marketing to data protection, even HR.
These are not skills you learn reading the FSA’s RDR guidelines. It is genuine business insight and, not only is it now critical to success in the IFA market, it is also an area in which adviser expertise is generally underdeveloped, so the need is acute.
This is why advisers will define their post-RDR success by working with product providers that can add value to their channel marketing beyond standard product, point of sale and regulatory support.
Once the RDR is implemented, success for IFAs will no longer depend solely on giving good financial advice, but increasingly become about running an efficient business, and leveraging provider support to achieve this.
Graham Lee is director of insight and strategy at Communisis
