Adviser firms are working hard to be ready for the implementation of the Retail Distribution Review (RDR), and there is much to be done before 31 December 2012 in order to achieve compliant status.
According to a survey by independent financial research company Defaqto - which explored advisers' opinions of the RDR - none of the respondents believe that the general public is aware of the RDR and fully understands the implications it will have for financial advice. In fact, 80% of advisers felt that the public know nothing about the RDR at all.
This finding highlights the extent of the challenge that advisers face when putting together their RDR compliant business propositions and, ultimately, in communicating their post-2012 offering to clients.
Defaqto's latest RDR paper called Key challenges and concerns about transition, published today, highlights six key areas that advisers will need to make critical decisions on in advance of 2013:
Whether to offer independent or restricted advice, or both
How to segment their clients
Making the transition to fees and the service proposition they will offer to ensure clients recognise what they get in return for paying for advice
Whether they will outsource investment decision-making and/or administration
Qualifications and professionalism
How they will communication their post-2012 service offering to clients
Defaqto's survey also found that 78% of advisers thought that the FSA and/or Government-led publicity campaigns to raise awareness would help them to educate their clients about RDR. Meanwhile 81% of advisers believed it would be beneficial if they were provided with educational materials to help get the message across to clients.
Fraser Donaldson, Defaqto's Insight Analyst for Funds, said:
"While the RDR is going to have a significant impact on advisory firms and their appointed representatives, the need to undergo a change in business model and service proposition, along with a fundamental change the way advisers are remunerated, is also likely to have a major impact on clients.
"It would be sensible for advisers to start communicating with their clients as soon as possible so that they get used to the forthcoming changes. With something as fundamental as adviser charging, some market research with clients on preferred payment methods and level of payment they are likely to accept may be advisable, as a sudden change in charges could cause additional problems. Generally speaking, there will be more of an onus than ever on advisers to sell themselves and their services to clients, to justify the fees they will charge - but this is also a potential opportunity for advisers to engage with clients and differentiate themselves."
The paper is available to download from the RDR Zone on Defaqto's website, which provides unbiased analysis, commentary and insight to support advisers as they prepare for 2013 and beyond: www.defaqto.com/adviser/rdr.
Defaqto's adviser research tool - Engage - provides whole of market financial product and fund information to support advisers' product research and selection; Engage also helps advisers with platform selection and due diligence, and generates reports for compliance and regulatory purposes.
Defaqto also provides bespoke consultancy services for advisers to support, amongst other things, Platform and DFM due diligence, panel construction and Paraplanning.