The advice business has changed a great deal in the past decade in three very powerful and significant areas.
The sector is much more professional, much more client-centric and purpose-driven, and it is more transparent in the way it gives advice.
This has been driven by several factors. We have witnessed a shift from the ‘product push’ era of sales and a transactional focus to one that is much more holistic, service-driven and focused on long-term, relationship-based advice.
One predominant reason for that is the removal of commission from the market.
When I joined the sector in the late 1980s it was about large sales forces acting as agents for a product provider, selling whatever product that provider decided to push to market.
Impact of RDR
It is very different today, where products are designed specifically to client needs, ever more tailored for individual circumstances.
That shift has been significant. It has accelerated since the Retail Distribution Review, and has taken a time to embed, but in my view, it is now clear for all to see.
- The advice business has changed dramatically over the past decade
- A large part of this has been the removal of commission
- Advisers are much more client-centric
As mentioned, I believe one of the main drivers is the removal of commission and the move to client-agreed fees, which has been predominantly driven by regulation.
There have been quite a few different staging posts on this journey, but RDR had the biggest impact almost 10 years ago. However, it has taken a while since the implementation of RDR for a change to really flow through. It seems to have taken three to five years for some businesses to adapt, with some struggling and some disappearing.
Those that have successfully made the transition have enjoyed an increased level of control, profitability and client loyalty.
Government change alongside regulation has been a big driver too.
They have not always worked together though and one sometimes wonders if the Treasury actually talks to Canary Wharf at all before making decisions.
But some reforms such as pension freedoms have driven the sector towards a much more service-oriented model driven by client demand.
Technology has also been a key driver of change.
The industry is using technology more effectively now and although there is still a long way to go to compete with other market sectors, it is clear that technology has been utilised to assist advisers to show where they can add value and enable them to adapt to changing service demands.
New technologies such as cash flow modelling, or our ability to deal with clients remotely through Skype or Zoom, have greatly improved the client experience and adviser efficiency.
Advisers can deal with more clients, more effectively and provide a broader, deeper, more holistic service, which really enhances the relationship they have and the value they add.