The ability to change and adapt aids survival (and failure can lead to extinction) and the financial services sector is no exception.
So it is out with old remuneration models, manual/labour-intensive systems and ‘once-and-done’ client engagement models with no ongoing service. And in with transparency on fees, remote and self-servicing for clients and economic and efficient service delivery. But there is still some way to go.
I estimate it will take an average of between 18 months to three years for advisers to find the model that best suits their customer bank. By then, they may have made up to five attempts to find the solution that suits them and their customers best.
Once established, however – and after the anticipated short-term reduction in cash flow that many will experience – they will find they are able to build a more sustainable business and one which, ultimately, will have a larger re-sale or cash value.
I also believe the vast majority will be looking more closely at their protection portfolio, which can often be overlooked in preference to over-focusing on the investment side.
Obviously, it is still early days and, although one cannot yet draw any definite conclusions, there are tangible signs that those who have made the transition are already seeing an increase in income.
Advisers are quickly learning how to explain the value of the expertise they provide and clients are responding with a general willingness to pay.
Many are finding that it is more of an emotional journey for the adviser than the customer. Advisers who can engage with their customers are finding that interpersonal skills and the ability to sell themselves is as much a factor as the proposition itself.
Adviser feedback post-RDR has revealed three main findings:
- Interaction with and learning from the experiences of fellow advisers is invaluable.
- It takes time to get your offering right.
- There has been much less resistance to fee-charging than was anticipated.
Ironically, that lack of resistance is not in the slightest bit attributable to any awareness campaign mounted by the FCA. Instead, it is down to a growing recognition by consumers that one cannot expect something for nothing nowadays. Hence the transition has been received more favourably than expected. In return, however, clients expect certain key levels of service. Experience also tells us that customers are increasingly utilising technology to conduct their own research before turning to an adviser for assurance, expert advice and to complete transactions.
Even though customers are a lot savvier, however, it is vital to remember that insurance, investment and protection policies are often still sold and not bought.
Then there remains the increasing problem posed by the savings gap, which offers a wonderful opportunity to help customers with less wealth. This at a time when, paradoxically, the cost of regulation is putting financial advice out of reach for an ever-larger section of the population.