We have said in the past that the only constant in our industry is change. Well, we certainly have an abundance of change to contest with these days… the government (and its ministers), the economy generally, the stock and currency markets (prices can plummet as well as fall…!) and the ever present RDR.
Much effort and investment has been put into the Wealth and mass affluent propositions of most distributors as they come to terms with the need to charge (and justify) fees for advice. Much concern remains about whether consumers will pay fees for advice after the 2012 deadline and different interest groups are expressing conflicting views depending on their own position and motives. It’s worth remembering that consumers currently do pay for advice and whilst it is often still ‘disguised’ as commission, the reality is that after 2012, we will be working in a world where all investment advice (other than Basic) will require a fee to be identified and paid. When people ask if they would be willing to do so in the current environment, it has to be set against the context of the products current pricing and adviser’s remuneration method.
Post 2012, the price of the product will be the factory gate price and so will be different to what they would usually be charged today. The advisers charge will be specifically expressed as a monetary amount and if properly justified as being of value to the consumer, should be an acceptable price for what they get. Perhaps some advisers are struggling to justify the ‘value’ that their services give to customers and if so, they have either an education or articulation challenge (perhaps for themselves as well as the customer)!
I have heard Product Providers talk about how little they need to do to cope with the new environment, some see that they simply set the commission of the product to zero and that will be sufficient. I beg to differ, the new environment is going to be competitive and it will expose Product Providers inefficiencies in a way that they have not seen so far. They will need to innovate, make sure they add real value and deliver excellent service if they are to convince advisers and customers that they are the right choice.
Many advisers have started to review, re-engineer and improve their business propositions in readiness for the new requirements. However, just as Providers need to ensure that they are efficient and deliver excellent service, advisers will be competing to offer their services at attractive fees, which in theory can be compared by consumers as with many other commodities and services.
We have always said that technology has an important part to play, and whilst it is a cost to a business, chosen and implemented properly, it will deliver efficiencies and service improvements that help secure business and improve the bottom line.
Those who are fearful today are probably right to feel that way…they need to develop a clear strategy for not just how to cope, but how to prosper.
