Hi there!

With the series of Discussion Papers, Interim Updates, Feedback Statement and now CP09/18 published last week, the RDR (RDIP) story rolls on towards the milestone deadline of 2012 – Olympic year. The CP has much to talk about and no doubt we, and much of the industry, will be debating the implications over the coming weeks.

We were talking with one of the major technology suppliers last week and the debate turned to the role and future of Product & Fund Research tools. There was a feeling that these have lost their attraction and perceived value over recent years and a question of their survival was posed. Our own view was that there could be resurgence in the appeal of these tools in a post RDR world; especially driven by the need for IFAs to have assessed the whole market for product suitability and fund choice. Whilst I am sure there are many IFAs that would say they already do look ‘holistically’ using their own knowledge or tools such as Synaptic, or Defaqto. That having been said, I still believe that there will be a good number that rely on a smaller ‘chosen’ group of ‘tried and trusted’ providers. The obligations of RDR will put more focus on the evidence to support the IFA’s claim that they looked at the whole market and made the most appropriate choice. Indeed, as with so much in UK regulation, the ability to ‘prove’ that this process has been fully applied is likely to be a driver in advisers turning to Research Tools, to both do the exercise and to have a demonstrable audit trail to prove it too.

These tools will have to be all-inclusive (breadth) in covering the market and contain comprehensive details on Providers, Products, funds and maybe even some product options that don’t often feature – such as National Savings. The information will most likely go beyond factual quantitative analysis and comparison, to include more qualitative information, including service and financial strength. Indeed, we have seen one such tool incorporate advisers’ feedback and we could see a similar situation to many Web2.0 applications where the ‘community’ of users provide and rely on their own reviews and these could be augmented with ‘independent experts’ and consultancy practices views.

The product and fund choices in the market are currently large and, notwithstanding provider consolidation possibilities, it is clear that more of what are currently non-commission paying alternative products will have to be considered when giving advice. Having so many options and a need to show justification in choice will be an added pressure. Some advisers may choose to do this work themselves, but this could be an expensive use of their time and if Research Tools are competitively priced, they could become one of a number of the necessary technology solutions that advisers use as a matter of routine.

We will shortly be doing a more detailed analysis of these tools and looking at if and how RDR may influence their development in the future.

For about a year now, I’ve been harbouring a guilty secret – last July, one of my co-directors (the grumpy one) acquired a new 3G iPhone – I knew I was locked into my contract with alternative supplier for another year and unable to upgrade – I was extremely envious, bordering on dribbling with jealousy. I had to wait.

So, a year passed and I waited patiently (NOT!) and earlier in June, Apple announced the revised, bigger, better iPhone the 3GS. It was time to pounce.

So, my shiny new handset arrived just after launch, courtesy of O₂ the sole supplier in the UK – I decided to go for a white one (I didn’t actually, it was sent in error but I couldn’t be bothered to change it) and it was the 16Gb version – I felt I couldn’t justify the larger 32Gb. It worked straight out of the box, after I had registered it via iTunes – the Apple application used for synchronising, backing-up and moving media to the device.

I have read several stories about the iPhones relevance in the corporate market – some very critical pieces, with CIO’s recounting doom and gloom, corporate security leaks, excessive consumer desirability, too many non-business functions and alike. From our perspective, a smaller business as we are, the functions offered are second to none – we use an outsourced Microsoft Exchange email service – the iPhone connects seamlessly to it and can receive ‘push’ email, ie near instantaneous delivery, to the handset – calendar, contacts and notes are all synchronised across all the machines I use, PC, iPhone etc. Yes, I did have this on my previous ‘phone, which was a Windows Mobile device, but the difference in the user experience is amazing. I can remotely wipe the device if lost or stolen and using the Apple MobileMe service, can send a message to the handset and locate it using Google Maps – very clever.

I have Google Maps, which orientate themselves correctly using the inbuilt digital compass, together with navigation etc. With the new version of the iPhone, I can link the device to my laptop and use the iPhone modem – this is called tethering and removes the need to have a separate 3G ‘dongle’ to connect when away from the office or Wi-Fi access point.

So what are my first impressions:

The device looks the bees knees – the screen surface is better and resists grease and fingerprints
It’s quick – all the function operate swiftly, with no delay
Email operates beautifully and web-browsing is very easy and clear
The extra applications that you can get, a lot of them free, really enhance the machine – I’ve got a spirit level and a torch – essential financial services items!

What is interesting is how a device like this can change the habits of both consumer and service provider. I read recently in thinkbroadband.com that 40% of all mobile web traffic comes from the Apple iPhone according to mobile advertising firm, AdMob, who collated worldwide statistics. The latest report weighs up estimated handset sales based on Gartner’s 2008 report and found that whilst only 8% of smart phones sold were iPhones, they made up for 43% of mobile web traffic in April 2009. That really does change the commercial model of the mobile ‘phone companies and moves away from just the provision of voice services.

For those who already have made the jump, the new iPhone might not appear to be much of a revolution – it is more of an evolution, but for me having just acquired the new model, it’s one of the best pieces of new technology I’ve had the pleasure to possess for a very long time – covet, over!

Whilst we are still awaiting the publication of the FSA Consultation Paper for how the implications of RDR (now RDIP) will be implemented, we touched on the subject of fees last week and so we thought it was worth looking at the ‘Guided Sales’ opportunity. Guided Sales is being debated and tested by a number of financial services industry companies – including providers, distributors and technology suppliers. Those that have followed the ‘pendulum’ movements in what RDR proposed, will no doubt be interested in how the next chapter of this story unfolds.

The April 2008 ‘interim’ statement seemed to offer a simple ‘non-advised’ – decision tree – route for consumers to purchase products that couldn’t or wouldn’t pay fees. There was and still is a legitimate concern that the effect of ‘Adviser Charging’ could lead to a ‘financial underclass’ and this would not be politically or socially acceptable. However, by November’s Feedback Statement, there had been some degree of ‘backtracking’ and the FSA was keen to encourage the ‘Guided Sales – Advised’ route, which was felt to be less exposed to potential ‘miss-selling complaints’. Even so, whilst this potentially low cost route to market is still attractive, the opportunity still has a number of hurdles to overcome:

• Can systems and processes be designed that will offer an attractive, easy to understand means for the mass consumer market to engage?
• Can distributors deliver these services in a cost effective manner?
• Can the FSA and FOS collaborate in agreeing a clear set of guidance that protects the consumer and helps to minimise the risk of damaging complaints?

On the first bullet point, the technology companies and a number of distributors are working closely with consumer research groups as well as the FSA, FOS and ABI. Supportive research has been obtained, albeit that this risks being directed to supporting the desired outcome of those who commission it. In addition, innovative and creative design teams look to be coming up with some positive ideas that could positively engage the consumer.

On the second bullet, I think that it is too early to say if this channel could be ‘cost effective’. Much will depend on the degree and volume of consumer interest and fulfilment. However, there is a real motivation to address the problem and whilst there will be those that criticise the potential limitations of this ‘cheaper’ channel, we should be looking at the positive benefits for the whole industry in encouraging mass consumer engagement. Indeed, whilst the products and services may be fairly basic, not everyone can afford a Jaguar. So the analogy of using a Tata Nano (cheap car) to get from A to B may better than nothing if that is all that the consumer can afford. Indeed, they may in time be able to ‘upgrade’ the product, or ‘trade-up’ to a better vehicle.

The third bullet point requires all parties to be open minded and pragmatic in identifying areas of risk in the systems and processes that are being designed. They then need to work positively together to remove or reduce these in a clear and consistent way that also avoids the application of ‘retrospective hindsight’ being used to create another damaging wave of ‘misselling claims. This truly is in all parties interests. Whilst it may not be possible for the FOS to offer ‘safe harbour’ security over the application of FSA regulations and guidance, they must not simply ‘sit on the sidelines’. Having read the response of the FOS to the RDR Feedback statement (Nov 2008), I believe that their approach has been encouraging, though this needs to feed through to proactive action and support (see FOS link here ). Will the industry and regulators rise to the challenge or will they be too frightened of failure to invest the effort in finding a workable solution. Remember that immunising yourself against risk usually means you immunise against the benefits of getting a return.