RDR is worth the price of admission

Jonathan Faurie, FAnews Journalist

For those in the industry who are faced with the prospect of the Retail Distribution Review (RDR), it can, at times, become hard to look at the situation and not have the gears within your minds turning thinking about the challenges that it will pose to your business.

And nobody can blame you for this. Humans are most afraid of what they do not know or cannot explain. For people who have been conducting business in a specific way their whole careers, the prospect of change is scary.

The voice of reason?

At the recently held Momentum Mindshift Conference, Brian Foster, Co-Founder of Beyond RDR, worked through the implementation of RDR in the UK, and he had a few unique insights to share with the advisers gathered at the conference.

“RDR is not an advice issue, it is a business model issue. We cannot look at the world as it is today and deal with an old business model. We need to implement necessary challenges in order to remain relevant,” said Foster.

You don’t have to go very far within the industry to find someone who has a few criticisms about the Financial Services Board (FSB) and the way they are going about implementing regulatory reform. At times, some of this criticism is valid; sometimes it is not. But we need to take a step back and have a look at how the FSB is engaging with the industry on its regulatory reform journey.

“The FSB is doing something special in South Africa that never happened in the UK. The level of engagement and support for brokers, advisers, intermediaries and financial planners in this country is far beyond what was present in the UK. I sat through the FSB talk on day one of this conference and heard the regulator refer to changes that will affect us as opposed to you. There is a lot of support from the regulator in this country,” said Foster.

Spirit of change

One of the keys to success in this new market place is gaining new ground and finding new business; and there are a number of advisers in the industry who are struggling to achieve this. There are also some misconceptions in the market which is not helping this.

The first misconception is that you need a lot of money to reach people, and the second is that technology is going to be a major disrupter in the industry.

“You do not have to have a lot of money for your message to reach people. You need to look at how you can do business in a different way and how to be entrepreneurial. The internet can facilitate this and can open up a whole new world to those advisers who do not have the same cash resources than that of larger brokers and brokerages,” said Foster.

At the end of the day, it comes down to this simple equation: companies (product providers) have money and control, advisers have relationships and clients. And advisers hold the key because they have the bargaining chip of relationships that companies seek. “This was never fully appreciated in the past. However, this is changing,” said Foster.

This relationship will also develop in the future as advisers see the services they are offering their clients in a different light. He added that it’s about solving a meaningful problem and making money for your client.

Client segmentation

Client segmentation is becoming a major talking point in the industry. Industry commentators such as Kate Holmes, Founder of Belmore Financial, is outspoken about the fact that advisers should be able to choose the clients they work with. And if they don’t like them, then fire them.

Foster has a different way of making a similar point. Imagine you are on an aeroplane traveling internationally for business or for a vacation. A small amount of seats on the flight belong to first class passengers, a greater amount of seats belong to business class passengers, and the greatest amount of seats belong to economy class passengers.

“It is important to understand why passengers pay such exorbitant prices to travel first class and business class. It’s the experience – they pay for a more inclusive experience than what  they will receive in economy class and are therefore treated differently,” said Foster.

This makes sense if we correlate it to the adviser universe. You will have some clients who purchase the necessity products, and there are clients who will spends lots of money because they can afford to. Foster’s advice is to know which market you want to play in and formulate your messages accordingly. “You need to know where you are before you can decide where you want to go to,” he concluded.

Editor’s Thoughts:
If we can sum it up in one phrase, it is all about leaving a legacy. RDR preaches fairness and equality to clients. And rightly so, because the legacies that you leave behind by helping clients achieve financial wellness is worth any price of admission the industry or the FSB asks you to pay. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.