Survival tactics for the implementation of RDR

Mike Clare, Founder of Mike Clare Consulting

There are fears in the industry, whether rational or irrational, that the Retail Distribution Review (RDR) will usher in the demise of the independent financial adviser (IFA). However, while the industry feels that the Financial Services Board is walking around with a big stick to make sure there is compliance to the world they are creating, some of the changes may prove to be beneficial to the industry.

There is also plenty of scope for survival. The industry is far from the doom and gloom scenario that many industry participants have suggested, and there are opportunities for IFAs to take centre stage in the industry.

Strategic conversations

Sun Tzu has long been regarded as one of the greatest military minds in history purely because he knew that war was about strategy and not just two armies running towards each other with violence on their minds. His book, The Art of War, has been used by countless generals and has won many wars.

Mike Clare, Founder of Mike Clare Consulting, points out that in any business, you need to have a series of strategic conversations in order to move forward in the industry.

“In an industry where the client is becoming more engaged, IFAs need to articulate their goals and visions with their clients. They need to provide them with something that is compelling and inspiring. This is what will facilitate significant buy-in to your value proposition,” says Clare.

This suggests that IFAs need to be more introspective and will have to revisit their business models in order to refine their approach to business.

Clare adds that IFAs need to look at their business and determine what is working for the business and what is not working. This will allow them to take what is working and enhance it. “Take what’s new and develop it. Also, take what is not working and get rid of it,” says Clare.

Know your world

It is imperative that the IFA is aware of the world that he operates in, and the dynamics that shape this world. Clare points out that there are a lot of opportunities in the industry for those who roll up their sleeves and dive into the deep waters.

Moving from a commission based practice to a fee based practice can be scary for a lot of advisers in the industry who have been conducting business in a particular way for many years. However, there will always be a demand for a valued adviser.

But the client is becoming more involved in the industry and they are becoming more enlightened. Perhaps the IFA that tries to be all things for all people is a dying breed; you simply cannot be a jack of all trades but a master of none in an industry where clients want focused and specific advice. Consolidation of actions is key.

“Another problem in the industry is distortion and how the public access’ information. There is a need for your skills in the industry to explain information which are foreign concepts to the Average Joe consumer. And if you are not on the internet, you won’t get to speak to Average Joe,” says Clare.

Key divisions

Family people have been faced with this conundrum many times, you have to divide yourself into many pieces to keep many people happy. In essence, this is what needs to take place in your businesses.

Clare points out that in the post RDR world, advisers will need to explicitly explain their fee makeup to clients. Therefore, they need to understand their total cost to client better than them.

“There needs to be a balance between people, operations, clients and the financial aspect of your business. You need to develop the skills of the people in your company and you need to make sure that your operations are being run by the right technology. There also needs to be time spent with clients because this is how you make your money, and there needs to be a focus on the financial aspect of the business and allowances need to be made for days that you can bill clients for,” says Clare.

A clear distinction also needs to be made as to which clients get the most attention. Typically, there will be high value clients in a business and low value clients. And it is only natural that the high value clients will receive more attention than low value clients. Clare points out that this is the space where clients need to be put into boxes. “Don’t give all your clients the same thing. Focus on the clients that will make money for your company,” says Clare.

Editor’s Thoughts:
We have been hearing that the industry needs to change for a while now; but how often is practical advice given to achieve this change? While we are not saying that Mike Clare’s suggestions is the silver bullet that will work for every company, some of the suggestions posed may work and may benefit your practice to change to the post RDR world. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.