Six years have passed since former FSA chairman, Callum McCarthy’s (in)famous speech in September 2006, when he described his vision of the future distribution model for retail investment products. RDR is finally here.
Naturally, many advisers have been focusing their attention on the achievement of QCF level four qualification and it has been quite a last-minute nip-and-tuck affair, with some results being held back until quite late.
Indeed, in November last year, the FSA published a quarterly review indicating that as many as 24 per cent of advisers were not RDR-ready, on the eve of implementation.
Almost certainly the adviser landscape has been affected by the RDR but the predictions made by the FSA of around 24 per cent loss may not be fully understood for some weeks to come.
So what now? A key objective of RDR is improved professionalism. Those advisers who have achieved QCF level four can put studying to one side and ensure the maintenance of CPD records so that their statement of professional standing can be renewed.
Any new year’s resolutions made by IFAs will surely have included planned CPD activity and establishing the habit of recording it clearly so you know not only what you did, but why you did it and what you learned or will do differently as a result.
This, of course, should be done in conjunction with a review of their respective business plans, so that the required 21 hours of structured CPD activity can support the overall business objectives and the delivery of services that clients will be willing to pay for.
This should include clearly describing your target market and clarifying your business proposition – either as an independent or restricted adviser – to best suit the needs of your business and your clients.
Post-RDR, while advisers are still using their sales skills to persuade and influence clients to take particular steps to meet their goals, the emphasis is now less about selling a product solution and more about selling your advice, time, expertise and skill.
It will be reflected in some very necessary changes to the reports you provide, which should explicitly cover your fees for investment advice and explain the benefits the client can expect to receive from the services purchased.
Other challenges for advisers to address include whether or not to charge VAT and of course, do not forget about treating customers fairly.
The FSA (and its successor the FCA), will carry out a post-implementation review against their success indicators, as set out in their Measuring Progress and Impact paper of November 2011. This assessment of short-term achievements will take place no sooner than late 2014, with early indications expected in the Retail Conduct Risk Outlook due in spring of this year.
In the interim there will be themed activity to gather information on the key RDR objectives throughout 2013, covering professionalism, charging structures, description of services and market distortions.
One thing is for certain: the regulator can be expected to closely scrutinise all firms’ retail mediation activities returns to formulate and direct their supervision activities.
