Investec's Gary Dale: What the RDR means for struc prods?

Returning to work after a week's holiday - I say holiday, but anyone who has been to Centre Parcs with three children before will understand this may not be the correct word for it - I found my inbox full of emails either extolling the virtues of the ill-fated RDR, or declaring doomsday on the industry.

I use the term 'ill-fated' because, no matter what the eventual outcomes, it is bound to upset and disappoint more than not, in my view.

"RDR spells the end of IFA commissions", "IFA market to consolidate following sweeping industry changes", "Structured Products providers need to rethink business models", "RDR could cost £10k per registered individual", etc are just some of the comments I have read or heard over the past week or so.

Let us not forget the ethos behind the RDR: to remove provider bias on remuneration and generally raise professional standards across the investment industry.

Will the RDR deliver what it set out to achieve? Who can say but that is not the purpose of this short blog. What is clear is that we are now on CP 09/18 which has been published following much debate and dialogue within the market since the initial FSA discussion paper in 2007. Implementation of these proposals is targeted for 2012. In summary, there is still a lot of talking to be done and undoubtedly many things will change time and again before the results (good or bad) are embedded.

I do however take exception to the notion that structured product providers may need to change their products and business models to cope with the outcomes of the RDR. In addition, the comments from some that many of these "opaque and complex" products cannot be sold without high adviser commissions are utter nonsense in my view.

Many providers may indeed be caught out by these proposed changes to adviser remuneration, however this will be by default and not design.

One of the key benefits of structured products is they are quickly able to adapt to change and that includes adviser remuneration. Ignoring any minor operational issues, we will very quickly be able to change the way we market and design our products whilst some of the more traditional investment houses and life companies may not be as fortunate.

Having said all that I do not believe the RDR will enhance the advice model going forward. My own view is that the RDR, in its current format, may result in less people accessing quality advice which I have to believe was not in the original objectives.

But, to finish on a positive note, I do believe there is substance to one recent headline, "RDR will give advisers ‘control' over their finances".

Whilst not perfect, the remuneration proposals WILL remove provider bias AND give the word ‘independence' back its proper status.

I also believe many structured product providers are well placed to ride the RDR wave and demonstrate that transparency in product design and changes in remuneration will not result in the chaos predicted by some.

Gary Dale is head of intermediary sales at Investec Structured Products

www.investecstructuredproducts.com