Your value proposition: pre and post RDR

Myra Knoesen, FAnews Journalist

While some see the Retail Distribution Review (RDR) in a positive light in terms of regulating the market and supporting the integrity of the insurance market as a whole, others believe it is complex and will be costly.

During the Momentum Risk Summit, held at Sun City Caroline Da Silva, Deputy Executive Officer at the Financial Services Board (FSB) emphasised that advisers are faced with social, economic and political threats that challenge their businesses every day.

“In these times, unless we have some kind of structural change, advice in its current form will not be sustainable. We want RDR to shape an environment that ensures that fair and affordable advice is available to all, and in order to ensure that, we have to make sure that advisers and advice is sustainable,” she continued.

“We have to do things differently, we have to understand business, clients and we have to be outcomes based,” she said.

RDR and the adviser community

Rachel Best, Associate Director at PricewaterhouseCoopers (PwC) discussed the RDR challenge and what it means for the adviser community.

“RDR will introduce/change a broad set of proposals to regulate the distribution of insurance and investment products, it will differentiate and categorize advisers, distinguish the split between services to customers, product suppliers, services linking customers and product suppliers, define permissible types of advice fees and cap permissible commission payments for risk products (supplemented by advice fees),” she said.

“The key consideration for you, as an adviser, is to not only have a value proposition today that you can charge for, but a proposition that will remain relevant post RDR,” she said.

Best said there are a few more considerations to take into account. “Firstly, how important is categorisation to your client, for example, tied versus independent? Secondly, is your client understanding of the current commission model today and how that will change post RDR?

The customer of today

“Because of connectivity customers today are different; they want and expect more. They do their own research, they have easy access to alternatives and choices and they take the advice of their peers.”

According to the 2014 PwC Strategy and Analysis South African Social Attitudes Survey, customers’ value customer-centric service more than the products they receive from their insurer. There are also a growing number of customers confident to make their own decisions, irrespective of their knowledge and experience.

The majority of customers, Best said, are becoming sufficiently confident to make financial decisions without consulting an adviser. However, given that financial knowledge levels are often low, some level of “intelligent” guidance is needed to ensure that these individuals make appropriate decisions.

“To deliver these requirements in a differentiated way, it is important to understand customers’ preferences, circumstances and needs. But how do you package all these considerations into the value proposition?” she asked. 

It is about what makes you, as an adviser, different from the other advisers, she said. 

Packaging the value proposition

Best said it all starts with understanding customer needs from product, service and relationships. She said you must ask yourself:

•          What products do my clients need?
•          What level of advice is needed or expected to guide their decision?
•          How much are my clients willing to pay?
•          What services do my clients need?
•          What are my customers willing to pay for?
•          What are the expectations of my clients in the client relationship?
•          Is the product relevant to the customer segment?
•          What is your niche offering?
•          Are you servicing Millennials or retired clients?
•          What kinds of expertise are at hand?
•          Consider what the value versus fee is. What is the value you provide?
•          How do you price your fees for advice? 

“It is all about what customers’ value and how an adviser will articulate that value proposition in a way that customers will want to engage with them. The key is to make consistent choices based on customer segments and figuring out who the segment is and how to create that value proposition for those specific customers. You cannot differentiate yourself other than formulating a good value proposition. So figure out what makes you different and why a customer would want to engage with you,” she concluded.

Editor’s Thoughts:
While some believe RDR will be complex and costly, it is best to embrace it and prepare because we are going to make it difficult for ourselves. As Da Silva mentioned you have to do things differently. Understand your business, clients and focus on being outcomes based. It is all about being sustainable pre and post RDR. What does your value proposition look like? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.