Four ways to get RDR-compliant

David Hesketh, group M&A manager at Perspective Financial Group, looks at the four options for IFAs who are not yet RDR-compliant.

For some IFA practices, the move to an RDR environment cannot come soon enough. Indeed, many are as far down the road towards full RDR compliance as it is possible to be. However, there are significant numbers that are either working more steadily towards the transition or moving at a pace which may leave them cutting it fine  for December next year.

There is, however, yet another group – a recent survey among delegates of the Unique Boutiques Investment Conference found 10% of IFA owners questioned did not expect their practice to be in existence post-RDR. We have been constantly told that the number of active practices will be impacted by the review and this survey suggests the scale of the likely fallout from the industry.

The reasons why a business may not make it through RDR are plentiful. But the survey found they could be placed largely into two camps – either the business will be closed or sold.

The survey also highlighted some interesting underlying thought processes; namely, that the individual questioned was fearful of such an outcome. The suggestion being that this outcome was somehow out of their control and therefore they might be powerless to prevent the practice going out of existence after RDR.

Still time

This, however, is not the situation for most practices and, although time is running out, there are still options available either to ensure RDR readiness, sell the practice before RDR or, perhaps most interestingly, to do both by selling their business to a consolidator such as Perspective.

The first point to make, and I readily accept that this will not strike a chord with a number of IFAs, is that the RDR is an opportunity rather than something to be feared. Yes, it should be acknowledged that the transition requires resource, time and investment to get there, however if the practice commits to RDR, has a plan in place to make sure it can meet the timescale, and achieves the move, then there will be considerable benefits.

We should not forget that, in this ever-changing world, clients have never required good quality, independent advice at a reasonable price as much as they do today. Financial services and the myriad of products available have perhaps never been so complicated so a professional, well-qualified adviser should be worth their weight in gold.

This increased demand, coupled with the inevitable reduction in the number of IFAs in the UK post-RDR, represents a substantial opportunity for RDR-ready advisers. When reviewing all the work required to make it into the post-RDR world, practices should never forget this fundamental truism.

That said, the amount of work to complete is undeniably considerable and it is therefore not surprising that some practices are daunted by the task ahead of them. Many will look at the requirements – such as capital adequacy, exams and qualifications, and agreeing a new client advice process that is RDR-compliant with a transparent fee structure – and feel they do not have the capability to make the changes in the necessary timescale.