A Head Start for RDR
by Tony Collins, Chairman of OPAL
Thursday, April 26, 2012
We are now in the midst of the final inexorable slide towards the implementation of the Retail Distribution Review (RDR). Despite the slow initial reaction the fact is that from 2013 the sales-driven commission model will no longer exist and all eyes are on the industry, with watchers curious to see exactly what financial advisers and product providers are going to offer in terms of services and charging structures. The issue of migrating to an RDR-compliant service is now a pressing priority for advisers as the replacement of commission with service charges shaping up to be a seismic change for business models. However, despite the initial scepticism about implementation, the industry is coming to terms with the changes and the RDR should actually be regarded as an opportunity for firms seeking to gain a competitive edge in the market. However, this begs the question just how can providers differentiate and incentivise product offerings with the removal of commission and encourage advisers to continue engaging with them?
In many ways the RDR will signal a dramatic change of course for many financial services firms. Advisers will need to make it their top priority to develop closer and longer term relationships with their HNW customers. These IFAs will also be making different demands on product providers with many selections based purely on the suitability of the product and the level and quality of service offered by product providers in administering and running that product. Transparency is the watchword and is going to be increasingly vital to success in the advice industry. Providers will therefore, need to up their game and increase the focus on helping IFAs to meet the new demands placed upon them by delivering a more efficient, cost-effective and convenient service. In short, service will become the main differentiator - and effectively the new commission - in the financial advice world. Advisers will have their work cut out, with the need to focus on delivering a new client-centric service on top of keeping up with the constant changes to qualifications, rules and regulation.
So how can product providers tailor offerings to take advantage of this in the most cost-effective ways especially as time is now against them? Outsourcing the technology and product innovation areas of the business is one way as this allows providers to take full advantage of specialist expertise third parties can offer as well as driving down overall costs and improving efficiency. Crucially, by delegating the majority of the development process involved in creating new products and propositions, financial services firms can concentrate on the fundamentals of delivering the best possible service and focus on building stronger relationships with their customers.
The benefits of outsourcing are not strictly restricted to the product areas of business; tapping into bespoke technologies can also reap great rewards on the service front. It will be vital for providers to ensure the quality of service matches that of their products and advances in technologies offered by third parties make it quick and cost-effective to carry out tasks ranging from marketing, client communications and product distribution. However, time is of the essence with just months remaining until the RDR deadline. The sooner financial advisers realise the advantages to be gained from outsourcing for service and efficiency, the bigger their head start will be when the post-RDR race commences in January 2013.