RDR – survive and thrive
Richard Rattue, managing director of compliance firm Compli-Serve.
If the Financial Services Board’s RDR proposals are legislated, it won’t necessarily be the end of the world: in fact, some advisers will hardly notice the difference, while others that are more proactive will actually thrive.
“Advisers that have already started to align their practices to fair client treatment and fair remuneration should not be unduly troubled by the prospect of RDR,” said Richard Rattue, managing director of compliance firm Compli-Serve. He was speaking at Compli-Serve’s recent RDR conference, which saw discussions around the implications, possible outcomes and guidance on how to survive if and when RDR comes to pass.
“Some firms that kicked and screamed pre-RDR are saying they are better off now; and many have had transformational ideas,” said Brian Foster, a UK qualified certified financial planner, who lived through RDR in the UK and now coaches and consults to South African advisers.
At the conference, delegates were given four main guidelines for surviving RDR – and thriving.
- Create a great client proposition
You need to understand what your client proposition really is about, and you need clarity on why it is worth paying for. You need to understand what problem you are trying to solve. If you cannot articulate your proposition, you might have a hard time persuading people to pay for it.
A great client proposition will also be the only way to differentiate your practice under an RDR regime. Simply marketing yourself as honest, trustworthy and qualified isn't the answer. That will be expected. Nor is marketing yourself as a fee-based firm the answer. All firms will be fee-based soon.
“I believe that appealing to your ideal client's emotional desire for identifying and maintaining their desired lifestyle is the answer, and the client experience around that will become everything that value is based on,” Foster said.
- Engage your clients better
People want to engage with financial services differently. Some want face to face advice and some don't. Some want online engagement. Some don't see value in advice at all and want to 'go direct'. Some may well just want a product conversation and some will want comprehensive financial planning and coaching.
None of these are right or wrong. They are just different. They will need a different approach, and financial advice firms should be responsive to the engagement needs of their ideal clients. This is where the expectations are created at the outset, and poor engagement into a service that doesn't deliver what your client expected, will lead to problems.
- Have a robust advice suitability process
This means knowing your client better, really understanding their lifestyle aspirations and how those might be achieved. You need to ask better questions and unpack the real issues.
You need to show clients the extent of their problem, and that solutions exist. Change your sales process to an advice process.
You should also (always) undertake your own due diligence on what you recommend. You won’t be able to hide behind the excuse that you relied on marketing information provided by a third party product provider. “That's just lazy. If you want to be called a professional adviser or planner, then you need to step up and take responsibility for your advice.”
- Focus on business profitability
In a product sales environment, the incentive is to sell more products, that is, increase turnover. The volume of sales then becomes the most important factor. More sales equals more money for product providers and distributors. But, is each 'sale' profitable for the distributor?
Historically, most advice firms have never measured profitability. This needs to change. What is the cost of a sale? Do you know how much your business needs to generate in order to make a profit?
