Is a fee-based structure already the norm?

Andy McCabe, managing director of Selectapension, finds out 
just how prepared advisers are for the obligations of RDR.

With just over a year to go before the implementation of the RDR, the countdown is well underway. The review’s requirements are the most demanding the industry has ever seen, and although many advisers would like to be ready for the new regime as early as possible, full preparation is quite a way off for the vast majority.

So, just how far along the transitory road are advisers?

To shed some light on this often asked question, we examined data input by advisers into the Selectapension pension transfer calculators and income drawdown tools to see what evidence there was that they are already moving to RDR-compliant business models.

We examined transfer analyses and report data over the period May to July 2011 and compared this with August to October 2011 for money purchase, defined benefit and income drawdown products.

In the first three months of the period analysed: May, June and July, system users ran money purchase transfer analyses for funds totalling £567.2m, defined benefit transfer analyses for £117.6m and £76.4m worth of drawdown analyses.

Of these funds transferred, system users specified commission (at the default level or otherwise) for 95%, 95% and 93% of their respective analyses (weighted according to the value of the funds).

Overall, 94% of fund transfer analyses on our systems between May and July 2011 were commission-earning transfers, while just 6% were nil commission.

Looking at transfer analyses run by system users over the next three months, August, September and October, of the £584.9m worth of money purchase transfers run, users specified commission for 95%. Users also specified commission for 94% of the £135.6m worth of defined benefit transfer analyses run and 89% of the £71.3m worth of income drawdown analyses run.

Similarly to the three months previous, overall, 94% of funds for which transfer analyses were run in the period August to October 2011 were commission-earning with just 6% on a nil commission basis.