Blog: Beware provider 'help' on RDR

David Ferguson, CEO of Nucleus Financial, wonders whether advisory firms should accept business transition help from companies that may have an ulterior motive…

Lately, I have been troubled by the extent to which some providers have been offering to help IFAs prepare for RDR.

I just don’t understand it. Not only are many of these companies facing their own issues to deliver propositions and operations consistent with where RDR is heading, but how can they know how IFAs should behave?

After all, most providers have little or no direct client engagement. In addition, there aren’t too many people working for providers who have run successful modern IFA businesses.

In any event, all of this overlooks what I think is a crucial observation – the key principle behind the RDR (transparency of remuneration) is driving a fundamental change in the market. By encouraging greater client/adviser alignment, the old provider/adviser relationships are fracturing – after all, advisers can’t represent everyone and it’s much better to be on the same side as the person who is paying you!

I have said this many times before, but what is really happening here is a change in the balance of power in the industry – the alignment of clients and advisers is a wonderful thing and it will result in the old-style players losing their grip on the market.

Once advisers became free to design their own propositions and associated revenue models, the client outcome started to improve. This is obvious because the person closest to the action is most likely to know what is best for the customer.

So all this leads me to wonder just why providers are attempting to tell advisers how to run their business. Could it possibly be that they are seeking to influence behaviour going forward? Why would a wrap platform invest heavily in helping transition IFA practices when the only winners on the other side are the shareholders of the IFA business and the IFA firm’s clients?

And putting yourself in the position of an adviser, who should you listen to? Assuming you are seeking some advice, you have two or three options:

1. Listen to a life company/platform salesperson
2. Listen to another IFA firm that has been through a similar process
3. Procure professional consultancy services to assist

Now, I can certainly see merit in options two and three, but option one I find rather tricky. Surely it is better to listen to someone who has done it (or can help you do it), rather than someone who’s trying to do it to you.

It’s always tricky to draw parallels with other sectors, but I wonder how much advice Apple sought from EMI when developing iTunes or how much time Microsoft spent hanging out with Thomas Cook when building Expedia?

There are winners and losers through every period of significant change. The winners don’t generally end up being those who have taken the advice of the inevitable losers.