How the Sense network is preparing for RDR

This week I spoke to Tim Newman, managing director of Sense and one thing was clear, this is a network that knows its role and its vision.

Formed in 2007, Sense is a relatively new network but one that is growing. The accounts, for the year ending June 2011 (unaudited at time of writing), show turnover increasing by 48% to £7.2m and profit was up to £259,000.

Sense is part-owned by Threesixty Services and is a modest whole of market IFA network.

It is clear its ambitions are not to grow too large, as it is keen to ensure it can provide a personal service to its members, where the directors know each of the principals of the member firms.

To date it has 41 firms and 125 advisers as members and it plans to grow this in a controlled process through the next year by adding about two firms per month.

Sense is one of the most RDR-ready organisations we have spoken to. The team has a clear vision backed with a detailed methodology on how firms will get ready for 2013 and most are well down this process if not already ‘RDR ready’.

There are three key building blocks to its approach:

•  Define the customer proposition

•  Define the investment proposition

• Create a platform and technology strategy to support these propositions

For each of the building blocks, each member firm has to have formulated documentation to support its position and the Sense team provides them with a set of documentation, templates, tools, training and services to complete this process.

The network does not dictate the propositions but it does insist members have them in place and that each is well articulated and documented.

Defining the client proposition is the start point for each firm but once the proposition is defined it does not simply become another binder on a shelf in the office.

The Sense network provides each firm with a copy of Intelligent Office from IntelliFlo to encapsulate the key strands of the customer proposition and drive it into the everyday workings of the firm.

Tasks are set up in Intelligent Office to ensure key processes are defined, so, for example, if the client proposition is to carry out quarterly reviews or to send out monthly bulletins the events are logged and driven by the system.

Newman firmly believes that in a society that is increasingly becoming more susceptible to the lure of litigation when things go wrong, firms must act in accordance to the propositions they define and for which they charge, or face the wrath of angry consumers when markets downturn.

Intelligent Office is also used to ease the burden of some of the customer propositions.

“It is vital our members have efficient process to support activities like client reviews and this can only be done if we work smarter using facilities like electronic contract enquiry to speed up portfolio reviews,” explains Newman.

The second strand of the RDR readiness approach is to create a clear investment proposition. Is the firm taking a line on passive versus active investments?

Will it use multi-managers, discretionary fund managers or model portfolios? How will it measure attitude to risk and capacity for loss? Again, the Sense team provides guidance here but remains flexible in allowing the firms to adopt their own approach as long as it is compliant and sensible business practice.

The approach is brought to life as Sense has spent considerable time to integrate eight different ATR tools into its infrastructure.

Intelligent Office will record the results from whichever ATR is used but more importantly, the team has mapped the results of all eight systems to the six threesixty risk categories and mapped the volatility of these risk categories to many of the model portfolios on the market.