Top tips: Managing your firm's cashflow post-RDR

Head of corporate relationships at Parmenion, Patrick Ingram, offers his tips on managing your company’s cashflow under RDR.

There has been a mixed response from advisers following The Treasury Select Committee’s report on the retail distribution review (RDR).

But no matter how they have responded, most adviser businesses are faced with the clear fact they need to change the way they interact with their clients and at the heart of that is their business model.

One area that has been highlighted as an area for concern is the issue of cashflow management.

Time for action

Advisers are often so focused on providing the best advice and solutions for their clients that their own business models can be left at the bottom of the ‘to do’ list.

But with the implementation of RDR in 2013, it is no longer possible to sit back and consider the options for the business.

Action is needed and in a timely manner to ensure changes can be adopted at all levels of the business. For those firms looking to successfully adapt to the post-RDR world there are several courses of action available.

Firstly, it is vital to consider the financial challenge of the RDR within the overall process of evaluating and redefining the firm’s business model.

To achieve this, many smaller adviser firms will find specialist consultants can add real value to this process across a variety of areas, from the basics of RDR training, through to the selection of a technology platform and the marketing of an RDR compliant brand at the conclusion of the project.

Cashflow conundrum

One of the first steps advisers should take is to work together with accounting support to model the likely impact of RDR on the cashflow within their business.

One issue is that setting aside enough time to achieve Diploma or Chartered status takes time out from being on the front line advising clients.

All told, the bill can range from £6,000 – £10,000 per adviser in lost, chargeable, client facing time and in additional training costs.

These costs have been looked at with some care by the FSA in the aggregate and reported on in their successive RDR Consultation Papers. For example, CP10/14 estimates an industry-wide cost of £210m.

These costs can be material to an adviser firm and draw attention to the task of sharpening up the business model and streamlining internal processes.

The crucial consideration is how to leverage available time most effectively.

An obvious target area for re-analysis is the time spent on researching funds and altering allocations, as the process of obtaining client agreement to investment switches is both time intensive and compliance critical.

This therefore places a practical limit on the number of clients that can be looked after by each individual adviser and thus, the firm.

On top of this, the market instability of the past two years has drawn attention to the opacity of many of the issues around investment management and has made it logical for the regulator to expect higher standards of expertise and professionalism from those individuals involved in choosing the funds or investment solutions for clients.

It is important under RDR that advisers now place a heavy focus on the consistency of the services being offered to their clients.